Building And Construction Law - Security Of Payment Act By Manoj Narsey

SECURITY OF PAYMENT ACT

The Building and Construction Industry Security of Payment Act 1999 (NSW) ("Security of Payment Act") applies to all building and construction work in New South Wales except any residential building work carried to which the Home Building Act 1989 applies.

The intention of the government was to make it simpler for contractors or subcontractors to obtain progress payment for any building and construction work done, even though there is no written agreement.

A statutory debt is created under the Security of Payment Act without the rigmarole of going through the court system first to obtain judgment. This debt is then enforceable through the court system just like any other judgment/order of the court.

Payment Claim - Applicant

A payment claim:

1 must identify the construction work
2 must indicate the amount of the progress payment
3 must state that it is made under the Security of Payment Act
4 be served within either the period determined by the contract or 12 months after the construction work was last carried out
5 cannot be in respect of the same reference date
6 can include an amount not paid under a previous claim

Payment Schedule - Respondent

A payment schedule:

- must be served within the time required by the contract or within 10 business days after the payment claim is served
- must identify the payment claim
- must indicate the amount (if any) to be paid
- if the amount is less than the claim, then the reasons for it

If a payment schedule is not served or if a payment schedule is served for a lesser amount which is not paid, the claimant may:

- recover any unpaid amount as a debt
- make an adjudication application
- may serve notice of intention to suspend work under the contract

Adjudication Application

A contractor may apply for adjudication of the payment of a claim whether or not a payment schedule is served. There are a number of formalities which have to be complied with to ensure that the adjudication application is in proper form. The other party responds to the adjudication application by putting in an adjudication response which, like all of these documents has to be in writing. An adjudicator is appointed by the ANA based on fixed criteria. After considering all the evidence the adjudicator must give a determination in writing including the reasons for it.

Enforcement

If the adjudicator finds in favour of the claimant, the respondent must pay the adjudicated amount within five business days (or a later date determined by the adjudicator) after notification of the determination. If the respondent fails to do so then the claimant may:

- apply to the ANA for an adjudication certificate and file it in the relevant court as a judgment for debt and enforce the judgment accordingly;

- suspend any further work under the contract after giving the respondent due notice of its intention.

A respondent is not able to apply for a stay or any other order preventing the payment either under the payment claim or even if the adjudicator has made an error in the determination. Nor can the respondent bring a cross-claim against the claimant and an action for recovery. The respondent must initiate another proceeding and pay the adjudicated amount into court.

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