Plain English Guide to Contesting a Claim under the Building & Construction Industry Security of Payment Act 1999 (NSW)
Is someone doing construction work for you? If you are a party to a contract under which construction work or related goods or services are being provided to you in NSW then the Building & Construction Industry Security of Payment Act 1999 (NSW) (the Act) affects you.
If you receive an invoice or claim for payment that refers to the Act, move quickly to seek legal advice to ensure you don’t miss the opportunity to dispute a claim for payment if you are not satisfied with the supply of the work, goods or services.
The following Plain English Guide outlines the Act and how you should respond to any claims made against you.
A Trap for the Unwary
What does the Act do?
The Act gives a builder or construction supplier rights that are in addition to those under a construction contract. It aims to assist their cash flow by providing a quick way to deal with interim claims for payment. For you, it will be a case of ‘speak up or pay up’.
If you receive a claim under the Act you are called the Respondent. The party who makes a claim under the Act against you is called the Claimant.
Those who can make a claim against you under the Act include your:
Does the Act apply to the contract you have with your creditor?
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:
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;
What are "related goods & services" in relation to ‘construction work’?
The following ‘goods’ are covered:
The following ‘services’ are covered:
The Act gives a Claimant the right to make progress claims against you and receive payment. This includes final or one off payments and retention monies.
What will a Payment Claim look like?
When can a Claimant make a Claim?
Due date for payment
The time for payment will be stated in your contract. If the contract is silent, then 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. This is a short and strict time limit so make a note of this date and either seek legal advice in that time or respond.
Disputing the claim
You can do this by serving a Payment Schedule on the claimant within the time for payment. The Payment Schedule needs to:
Be in writing – stating that is a Payment Schedule under the Act;
Identify the payment claim it relates to;
State what amount, if any, you propose to pay (the scheduled amount). This amount may be "nil";
If the scheduled amount is less than the amount claimed, explain in sufficient detail all of the reasons why (it is important you provide the reasons here because if they are not stated in the Payment Schedule you cannot raise any defence, set-off, or cross claim or other reasons for not paying.
Serve the Payment Schedule as required under the your contract, or if nothing is stated, by personally delivering, posting or faxing it so that it reaches the Claimant, no later than 10 business days after you received the claim.
If you have not served a payment schedule or paid by the due date:
You are liable to the Claimant for the claimed amount and the claimant can sue you for this debt through the Court. Alternatively, the Claimant may serve you with a notice that they intend to apply for Adjudication in relation to the claim and suspend work or supply on giving you notice of this. They can also exercise a lien over unfixed plant or equipment they have supplied to you.
If you have served a payment schedule but for less than the amount claimed and it is disputed by the Claimant:
The Claimant may apply for an Adjudication to determine the issue.
Adjudication is conducted by an independent person who decides the amount, if any, that is due in respect of the progress claim. Only a Claimant, can start this process.
Notice of intention to seek adjudication -
If you failed to serve a Payment Schedule;
Notice of intention to suspend work –
If a right to suspend is exercised under the Act:
Adjudication Application by a Claimant
The application must:
The ANA will then choose an adjudicator and you and the Claimant will receive a notice from him/her accepting the application.
If you had provided a payment schedule within time, you 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 you then have 5 business days after that date to pay.
Questions & Answers
What if the claimant’s work was defective and my failure to respond was an oversight?
For a start, you have made your life much more difficult, as your non-response has given rise to a statutory debt that must be paid by the due date. If you are sued, your options for defending the claim, if any, are very limited.
The person who sues you would need to show that this is correctly a claim under the Act, that it was properly served and that is does not offend the Act e.g. it is not more than one payment claim in relation to the relevant reference date. However, apart from this, unless you can show there has been misleading and deceptive conduct on the part of the claimant in relation to the way the payment claim was served, you will have to pay the amount claimed.
Do I therefore lose all my rights under the contract?
No. Section 32 preserves these rights and provides that any amount you paid must be taken into consideration in any proceedings under the contract. So you can still subsequently sue the claimant on the basis of defective work or goods. This is because the Act is designed to force an interim resolution to a payment claim. It does not affect the final rights of the parties under the contract.
When you sign a contract for construction work or supply of related goods or services, to be done, remember:
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
Representation in Court
For more information on how our building and construction lawyers can help you buy a house or apartment, please contact our team in Parramatta, Penrith and Norwest.
Disclaimer: The information provided in the document is a general summary and is not intended to be nor should it be relied upon as a substitute for legal or other professional advice.