Building And Construction Industry Security Of Payments Act 1999

How does this Act work?

In this report, the Building and Construction Industry Security of Payment Act 1999 (the Act) will be evaluated. This act applies to the New South Wales, Australia and it assists parties in receiving timely payments under a construction contract. Firstly, this report will evaluate how this act works by analysing its operations. Secondly, the objective of enactment of this act will be evaluated in this report to understand the role of this act. Thirdly, the provisions given under the act for operations of regular courts while entertaining any cases involving the payment issues raised in construction contracts will be discussed. Lastly, the amendments which are introduced in this act for protection of the rights of sub-contractors will be analysed.

This act is designed by the government to ensure that a person is able to receive payments within appropriate time under a construction contract for providing services or carrying out work related to construction work. The aim of this act is to ensure that contractors and sub-contractors receive their payment promptly. This act is targeted on moving the cash quickly in a construction relation contract to ensure that parties receive their payment within appropriate time and disputes are resolved fairly and quickly. This act applies to both public and private organisations. As per the working of this act, statutory rights of parties are recognised under construction contracts based on which the parties have the right to receive their payment within appropriate time. Section 14 of the act provides that the parties have to give the payment schedule to the contractors, sub-contractors or other parties in the contract. This liability is imposed on them after a claim is made to receive the payment. Various penalties are included by the government in this act for ensuring that the provisions of this act work properly.

Section 15 defines such penalties which are imposed on parties who fail to make the payment or give the payment schedule within appropriate time. Under those penalties, the contract can be rescinded by the party. The parties also have the option to make adjudication appeal in the court. The parties also have the option to enforce the payment in the contract. The operations of this act are further improved and strengthened by the introduction of the Building and Construction Industry Security of Payment Amendment Bill 2018. There are many changes proposed by this bill in the act which are targeted on ensuring that the payments of parties are made on due dates, and they are able to recover their money without external assistance. The working of this act is simple since the parties did not have to appoint professionals such as lawyers to make a claim for their payment. Thus, the operations of this act are focused on addressing the issue of non-payment or delayed payment in construction contracts.

Why was it introduced?

Section 3 of the act provides the objective for which this act was introduced by the government. The primary purpose of this act is to ensure that a person who is providing services or carrying out construction work is able to recover the payments relating to such work. The role of this act is to provide statutory entitlement to the parties under a construction contract under which they can claim for the payment regardless of the fact whether any provisions regarding the payments are included in the contract or not. The act gives the right to the party to claim for the due payment. This act also provides provisions for scheduling of the payment which is payable under the contract. The person also has the right to refer their dispute to an adjudicator for determination. This act did not intend to limit the right of parties under a construction contract or limit any other remedies which are given to the party for recovering of their entitlement. Moreover, the provisions regarding sub-contractors are introduced in the act which is targeted on ensuring the claim that the sub-contractor is able to receive the payment which is owed by a defaulting contractor.

An adjudication application can be made by a sub-contractor against a defaulting contractor to recover the money. The liability of the contract continuous until the claim is withdrawn by the sub-contractor and the principal contractor can withhold the payment until the claim is withdrawn by the sub-contractor. In case the claim is successful, then a reasonable opportunity is given to the sub-contractor to recover the payment from the defaulting contractor under this act or the Contractors Debts Act 1997. Before the enactment of this act, it was difficult for contractors and sub-contractors to recover their payments within appropriate time. The developers did not pay the parties on time to use the free capital in the business operations. They have to go through a long legal procedure in which their payments were delayed even further due to slow judicial proceedings. The government addressed this issue by introducing a comprehensive act which is focused on reducing the recognising the statutory entitlement of parties in a construction contract. Therefore, the role of this act is to ensure that contractors and sub-contractors receive their payment under a contraction contract with a proper time frame.

How does the act work in relation to the regular court actions?

Various provisions are introduced in this act which governs the actions of regular courts. Section 13 of the act provides provision regarding payment claims of parties. This act provides that parties referred under section 8 (1) are entitled to receive progress payments and receive such payments. This section governs the entitlement of both contractors and sub-contractors. This section provides that if these parties did not receive a progress payment with a particular timeframe, then such parties have the right to make a claim against the head contractor. Division 2 of the act provides provisions regarding adjudication of disputes which arise under this act and which are filed in regular courts. Section 17 of the act provides the provisions for making an adjudication application. This application is provided if the payment schedule is not provided by the respondent or the payments are not according to the payment schedule. These provisions must be abided by the sub-contractors while making the adjudication.

Section 18 of this act provides the criteria which the contractor and sub-contractor have to comply with while lodging an application in the regular court. The eligibility of the adjudicator is defined under this act which includes a natural person who has expertise, qualification, and experience which is prescribed; however, it did not include a party of the contract. Section 19 of the act provides that an adjudicator can be appointed by accepting the adjudication application by causing the notice which is served by the claimant and the respondent. After accepting the application, the adjudicator is responsible for watching over the case. Section 20 to 22 provides various provisions regarding the working of the adjudicator. Section 20 provides that the response on the adjudication application should be made with 5 working days from receiving the copy or 2 working days from receiving the notice of the adjudicator or whichever is later. Section 21 provides that the adjudication application should not be determined by the adjudicator until after the period is end within which the respondent can lodge an adjudication response.

The response is not considered as valid unless it is made within an appropriate period of time. Subsection 4 of this section given the right to the adjudicator to conduct any proceedings regarding the adjudication application by demanding further written submission of information, call a conference, set deadlines or carry out an inspection. Section 22 provides that the adjudicator is required to determine the amount, date and rate of interest of the due amount. Section 23 of the act imposed a liability on the respondent to make the payment within a reasonable time. Section 24 provides the consequences which are imposed in case the amount is not paid. Section 25 provides that the parties have the right to submit the adjudication application as the judgement debt which is enforceable accordingly. This application goes with an affidavit and other documents. Section 26 provides that the claimant can change the adjudicator in certain circumstances under which a new application can be made.

Many amendments are introduced by the government to recognise the entitlement of sub-contractors in construction contracts to receive their payment with the reasonable time frame. Division 2A of the act provides various rights of the claimant against the principal contractor. Section 26A of this act provides that the principal contract can be required to make an application for the due payment based on the required of the claimant. The request made by the principal contractor must include a statement in which the declaration is made regarding the genuineness of the claimant. Subsection 5 of the act provides that the person who received the payment must begin its process within 10 days. Based on this section, the principal contractor has to retain money on behalf of the sub-contractor in case they are making a claim though adjudication process. Section 26B of the Act provides that an obligation is imposed on the principal contractor to retain the money on behalf of the claimant. This obligation remains on the principal debtor until the application is withdrawn by the claimant, the respondent makes the payment, a notice is served under section 6 of the Contractors Debts Act 1997 or a period of 20 days has elapsed after receiving the copy of the adjudication application.

Section 27 has given a right to the sub-contractor to suspend the construction work if the payment is not made. The principal contractor under these sections means the owner of the property or builder who requires a sub-contractor. Further, amendments are made in this act to ensure that the entitlement of the sub-contractors is recognised by this act. The sub-contractors work under the head contractors, and they take actions as per the directors issued. It makes it difficult for them to make a claim for the money to recover it within an appropriate time limit. In case a sub-contractor is not available in a contract, then the head contractor acquires all the rights of the sub-contractor. Therefore, the government has made various amendments in the act for sub-contractors to recognise their entitlement on the due money to ensure that they are able to receive the payment within appropriate time.

Conclusion:

From the above observations, it can be concluded that this act is focused on ensuring that the parties involved in construction contracts are able to receive their payment within a reasonable time. This act is introduced by the government since it was difficult for contractors, sub-contractors and other parties involving in construction contracts to receive their payments within a fixed time frame. The operations of this act are simple based on which parties can easily make a claim about their due payment without the assistance of professionals. The purpose of this act is to recognise the entitlement of contractors, sub-contractors and other parties in the contract so that they can make a claim about their due amount and receive it within appropriate time. Various provisions are included in this act which provides provisions regarding the actions of regular courts while entertaining cases relating to this issue. The government also introduced various amendments in the act which are targeted towards recognising the entitlement right of the sub-contractors in construction contract to receive their due payment within a fix time frame.