Security Of Payment Act (ACT)

The Building and Construction Industry (Security of Payment Act) 2009 provides a debt-recovery process for workers in the construction industry. In the industry, the Act is commonly called the “Security of Payment Act”, where security of payment refers to a service provider’s right to receive payment as it falls due under a contract. All states and territories have security of payment legislation.

The object of this Act is to ensure that anyone involved in construction work or the supply of related goods and services under a contract is “entitled to receive, and is able to recover, progress payments”. The Act applies to any construction contract, written or oral.

“Construction work” involves “the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling” of buildings and infrastructure, and work by associated tradespeople.

Payment claims

Under section 15 of the Security of Payment Act, a payment claim for construction work, or for related goods and services, can be served on the person liable to make the payment. A payment claim must:

• identify the construction work or related goods and services to which the payment relates; and
• state the amount claimed; and
• state that it is made under the Act.

A claim must be made within 12 months of the work being done or the supply of related goods and services, whichever is later.

Payment schedules

Under section 16 of the Security of Payment Act, a person who receives a payment claim can respond by supplying a payment schedule to the claimant. The payment schedule must:

• identify the payment claim;
• state the amount the claimant will be paid;
• provide reasons the amount may be less than the amount claimed.

The schedule must be provided within 10 business days of receiving a payment claim or earlier if stated in the contract. If a schedule is not provided, the respondent becomes liable to pay the claimed amount on the payment due date. If a schedule is not provided, or if a schedule is provided but the respondent fails to pay in accordance with it, the claimant can make a court claim to recover the debt, apply for adjudication, or suspend work or the supply of related goods and services.

Adjudication

Under section 19 of the Security of Payment Act, a claimant can apply for adjudication of a payment claim if:

• the respondent fails to pay the whole or any part of the claimed amount; and
• the respondent fails to provide a payment schedule; or
• the respondent provides a payment schedule but the amount is less than the claimed amount; or
• the respondent fails to pay the whole or any part of the scheduled amount.

Before applying for adjudication, the claimant must have notified the respondent within 20 days that they intend to apply for adjudication and given the respondent 5 business days to provide a payment schedule after notification. An application must be made within 10 business days after those 5 business days and the day the claimant receives the payment schedule.

Under section 22 of the Act, an adjudicator can:

• request further information from either party and a response to the information from the other party;
• set deadlines for the supply of further information and comment;
• call a conference of the parties;
• inspect any matter related to the claim.

An adjudicator determines the amount of the payment, if any, the date the amount became or becomes payable, and the rate of interest payable on the amount. The determination must include the reasons for the decision. The determination must be made within 10 business days and must be supplied to the claimant and respondent as soon as practicable. Parties to an adjudication bear their own costs initially, but a successful party will normally be allowed to recover costs from the other party.

If the respondent does not pay the “adjudicated amount” within 5 business days or a specified later day:

• the respondent will be liable for interest;
• the contractor can give the respondent notice of an intention to suspend work or suspend the supply of goods and services under the contract, then do so after 2 business days;
• the contractor can apply for an “adjudication certificate” which they can file in a court as an enforceable judgement for a debt.

An adjudication determination can be appealed in extremely limited circumstances. An appeal can be made to the Supreme Court on a question of law, but only with the leave (permission) of the court and the consent of parties to the decision. The court must not grant leave unless it considers the determination of the question of law could substantially affect the rights of one or more parties and there is strong evidence of an error of law.

No contracting out

Section 42 of the Security of Payment Act overrules any provision in a contract, agreement or arrangement that:

• is inconsistent with the Act; and
• purports to, or has the effect of excluding, modifying or restricting the operation of the Act; and
• may reasonably be construed as an attempt to deter a person from taking action under the Act.

For advice or representation in any legal matter, please contact Armstrong Legal.