The Beginner’s Guide to making a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW)
By Peter Micevski, lawyer, Lovegrove Smith & Cotton
The Building and Construction industry Security of Payment Act 1999 (NSW) (“the Act”) is in place for the building and construction industry in NSW to avoid costly project delays and stopping some principals and contractors holding-up or reducing payments owed, in order to inflate their positive cash flow. The Act promotes the flow of progress payments by providing a statutory right to progress payments and a mechanism to quickly and fairly resolve disputes.
What this means for contractors, subcontractors, consultants or suppliers involved in a construction project, is that they have an ‘ace of spades’ that they can play to ensure they receive payments due to them by a principal or head contractor.
This article will help the general punter involved in the construction industry navigate their way through the Act, and ensure that they receive money owing to them for the carrying out of works or supplying of related goods and services performed by them.
Who can make a claim?
Those who can make a claim under the Act include contractors against principals/developers, subcontractors against contractors, suppliers against customers, plant and equipment hirers against clients, and consultants against clients.
However, the Act does not apply to contracts with homeowners who live in, or intend to live in, the dwelling where the work is being carried out. These contracts remain controlled by the Home Building Act 1989. However, the Act does cover all work, materials and plant supplied by sub-contractors, consultants and suppliers to contractors who have contract with such homeowners.
What work can be claimed?
Under the Act, you can make a claim on the respondent for the following:
- construction work you have done;
- construction material or plant you have provided;
- consulting services you have provided;
- interest on overdue progress payments;
- your losses and additional expenses due to work being deleted from your contract while you suspended work under the protection of the Act;
- cash security and retention money; and
- at the end of the contract, a claim under the Act can be made for the final payment.
We note, construction work and services can be claimed under the Act, even if the contract is not written, or does not provide for progress payments, or has only a single payment to be made when the work is completed.
How to make a Claim
To make a claim, the claim must:
- be made at the time stated in the contract or, if there is no time stated, on the last day of the month;
- be in writing and addressed to the respondent;
- describe the construction work, related goods or related services for which you are claiming;
- state the amount that you claim is due;
- refer to work done in the past 12 months only and establish the reference date for making the claim (note: only one claim can be made under the Act for each reference date).
We note that a recent amendment to the Act dispensed with the need for the claim to state that it was made under the Act. However, the amendments to the Act will only apply to construction contracts entered into after November 2013. Thus, if your construction contract was entered into before November 2013 you must include the words ‘This is a payment claim made under the Building and Construction industry Security of Payment Act 1999 NSW’ or a similar statement with that meaning.
It is advisable that you include the above words on all your invoices for payment, to ensure all your claims are covered by the Act.
For head contractors submitting a payment claim to a principal, they must provide a supporting statement that includes a declaration that subcontractors have been paid what is due and payable to them.
How to submit your claim
To submit your payment claim you must:
- serve the claim by delivering, posting or faxing it to the respondent (the contract may provide for other methods of service); and
- record the date of service (the date that the respondent receives the claim).
You may serve with the claim completion certificates, statements detailing the extent of the work completed, delivery dockets, photographs and other applicable contract document requirements.
When to expect payment
Under the Act, the date by which you are entitled to be paid is the due date for payment. If the contract provides a date or period for payment claims, then you are entitled to be paid by then. If the contract does not provide due dates for payment, then you are entitled to be paid 10 business days after you serve the payment of claim on the respondent.
What to do next
The next thing to do is to wait 10 business days. It is incumbent on the respondent to serve a payment schedule in response to the claim.
If the respondent fails to serve you with a payment schedule after 10 days, the Act requires the respondent to pay the whole amount of the payment claim. To recover monies due to you, you have the option of taking action in court or using the adjudication process.
If you do receive a payment schedule that you disagree with, you may apply for adjudication within 10 days of receiving the schedule.
It is advisable that you receive legal advice if you intend to take action in court or utilise the adjudication process.
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© Lovegrove Smith & Cotton 2014