Security of Payment in the ACT
Welcome to the Fray – Security of Payment in the ACT
Written by Sean McCarthy, Lovegrove & Cotton.
Following years of tardy reputation, the construction industry as a whole has had to address serious trends in non-payment, or delayed payment to those providing work under a construction contract. As far back as the Cole Royal Commission, the industry has been categorised as notorious for protracted, or non-existent, payments. Security of payment legislation (generally) provides a very real avenue for those owed monies under a construction contract [Section 6(1)(a)], who provide “construction work” [Section 7] or “related goods and services” [Section 8(1)] to have recourse to an independent adjudicator, who can assess a claim (“Payment Claim” – Section 15) from the Claimant, the response from the Respondent (“Payment Schedule” Section 16), and make a decision on what is owing (see Section 24 – Adjudicator’s decision).
The Nexus between the Construction Contract and BCISPA
BCISPA at first instance seeks to uphold, and indeed work in tandem with, the associated construction contract (Section 10 – Right to progress payments). It does not override the terms of the contract, as claims for progress payments must be done in accordance with the terms of the contract. Equally, the payment terms (and even contingencies such as associated certificates or sign offs) must be upheld in accordance with the contract – hence, my view that BCISPA works neatly in tandem with the existing contract.
If however, payment falls overdue or indeed does not occur, then a Claimant can issue a Payment Claim (marked as being under the appropriate Act, amongst other things), and then the onerous time frames for response start ticking.
Timing is Everything
Like most other security of payment Acts, BCISPA imposes extremely tight time frames, with potentially serious implications if those time frames are missed. Once a complying Payment Claim is issued under the Act, the Respondent has TEN DAYS only to respond by way of a “Payment Schedule”, outlining the reasons for non-payment or lesser payment than that claimed – failure to respond can result in the whole of the claimed amount being due (Sections 17 & 18). Many a Principal has been tripped up on this, with a great many cases resulting in enormous interim payments falling due. Equally onerous is the time frame placed on adjudicators, who usually have ten days to assess claims. Amounts due under adjudication decisions are due 5 days after the decision.
Beyond the Contract
Where projects can go wrong, is when a Claimant has exercised rights under the Act, and an adjudicated payment does not occur. Then the Act ceases to work simultaneously with the contract, providing additional rights such as at Section 29 (Claimant may suspend work) where the affected party (the Claimant) has a right to suspend work, and not be liable for any additional costs including delay costs…despite what the main contract says! [see Section 29(4)]
Security of Payment legislation has been generally referred to as “Pay Now, Argue Later” legislation, as it can effect prompt payment in accordance with the tight timing provisions, but does not necessarily preclude decisions made under the Act from being appealed or taken to court at a later stage (Section 43). This has certainly been the biggest evolution in security of payment, as Brodyn v Davenport  61 NSWLR established that adjudicators decisions were largely final, however more modern cases such as Chase Oyster Bar v Hamo Industries  NSWCA 190 have made it very clear an adjudicator’s decision can be overturned.
Eyes Wide Open – and we can help!
Experience says that two things trip players up under BCISPA: Firstly, the seriously tight time frames and the unforgiving nature of the Act when the time frames are not met. It is easy, for example, to clarify or substantiate a claim by reference to your Superintendent or Project Manager, and consequently let the 10 day response time fall by the wayside, potentially causing the claimed amount to fall due – even if it is poorly substantiated or disagreed with.
Secondly, be you Claimant or Respondent, the Act is highly prescriptive in specifying how a complying “Payment Claim” or complying “Payment Schedule” must be written. Particularly contentious is the response that needs to be made to substantiate reasons for non-payment, or reasons for lesser payment in a Payment Schedule: they need to be legitimate and well substantiated – simply saying “disagree” or not assessed yet will be insufficient reason [Section 16(3)(a) “why the scheduled amount is less” and (b) “…if the scheduled amount is less because the respondent is withholding payment for any reason – [indicate] the respondent’s reasons for withholding payment”
The implications for not getting it right can cause huge financial impost. By seeking the view of an experienced lawyer on matters in question is exceptionally economical when weighed against this possible financial burden.
Security of payment is an exciting topic, and worth spending more time on…there is a lot to write about, especially as case law evolves in other jurisdictions. Stay tuned as we explore some of the nuances of the Act in coming weeks.
Please contact Lovegrove & Cotton via email at email@example.com should you wish to seek our advice on a specific matter or organise training on BCISPA.