Security of Payment Act Guide

Help! I have been served with a Security of Payment Act Claim. What should I do?

Steps to be Taken

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Suite 603, Level 6 541 Kent Street

SYDNEY NSW 2000 Ph: 02 8272 1999 Fax:02 8272 1998

[email protected] www.turnbullbowles.com.au

Presented by Pierrette Khoury, Senior Lawyer

About Turnbull Bowles Lawyers

Turnbull Bowles Lawyers is a specialised Sydney CBD legal practice providing practical and comprehensive legal services to Strata Management and Building and Construction sectors. Our focus in these areas allows us to offer expert advice to our clients. We are skilled at advising on Security of Payment Act matters, Construction Contracts, Residential Building Defects, Home Warranty Insurance Claims, Strata and Community Title and Other Services that may be required. We recognise that some matters may best be resolved out of Court and as such we also offer Dispute Resolution Services. We are committed to providing our clients with excellence in legal services. Since our inception we have successfully represented a wide range of Owners Corporations, builders, developers, sub-contractors, individual lot owners and individual property owners. We are a division of Forbes Dowling Lawyers Pty Ltd, a subsidiary of Australian Receivables Limited with branches in Brisbane, Gold Coast, Sydney, Melbourne and Adelaide. We are proud members of the Australian EGS Group of Companies. As part of Forbes Dowling Lawyers Pty Ltd, we are able to provide advice and legal services associated with commercial litigation, insolvency and debt recovery in addition to strata management and building and construction matters. Time is of the essence when pursuing or defending a statutory Payment Claim. Accordingly, timely advice and properly drafted claims, applications, schedules and responses are important to ensure your interests are secured, in what is often an uncertain and fluctuating area of law.

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Having appeared and acted for clients in some of the well-known and influential authorities, we have the proven experience in drafting:

1. Payment Claims;

2. Payment Schedules;

3. Adjudication Applications; and

4. Adjudication Responses

within the strict time limits imposed by the legislation and we ensure prompt and efficient service of these claims regardless of how large a claim may be.

We also ensure that your Adjudication determinations are properly reviewed and that we advise you of any prospects of appeal that you may have promptly and, where available, we have the capacity and personnel to seek injunctions and applications promptly, invalidating or quashing determinations.


The Regime The NSW Building and Construction Industry Security of Payment Act 1999 (“the Act”) provides an expedited regime for builders and subcontractors to submit payment claims for money owing pursuant to construction contracts.

Pursuant to this regime, the process is as follows:

1. A Claimant serves a Payment Claim on a Respondent pursuant to a construction contract. The Act allows only one Payment Claim being issued at a time for each reference date.

2. A reference date is simply a defined cut-off date up to which the work, the subject of the claim relates to.

3. Construction work involves an array of work and the work is required to fall within one of the categories expounded in section 5 of the Act, which includes the usual construction type work such as the construction, alteration, repair, restoration, maintenance, extension, demolition of buildings or structures forming or to form part of land, walls, roadworks, power-lines, telecommunication apparatus, aircraft runways, railways, pipelines. It also includes associated works required in order to perform the construction work.

4. A Respondent to a Payment Claim serves a Payment Schedule on the Claimant, providing reasons for paying an amount less than the claimed amount. There is a strict time frame for a Respondent to serve its Payment Schedule and such is to be served within 10 business days of being served with a Payment Claim..


The Regime

5. If payment is withheld by the Respondent pursuant to the Payment Schedule, the Claimant then has 10 business days to serve an Adjudication Application on the Respondent and at the same time the Claimant is to nominate an independent Adjudication authority such as Adjudicate Today or the Institute of Arbitrators and Mediators Australia by way of example. The Act allows an application to be made to the Court for a debt due of the scheduled amount or a claimed amount where no payment schedule is served.

6. The Respondent thereafter prepares an Adjudication Response responding to the Adjudication Application and has either 5 business days to do so or 2 business days of receiving the notice of an adjudicator’s acceptance of the application, subject to whichever time expires later. The Respondent is required to serve its Adjudication Response on the Claimant and the Adjudicator. It is of crucial importance that you ensure that the reasons raised in your Payment Schedule are all the reasons to be relied on as a Respondent party because, as is often the case, new reasons provided in the Adjudication Response will not be considered by an Adjudicator.

7. The Adjudicator thereafter issues a Determination based on its consideration and assessment of the Claimant’s Payment Claim and Adjudication Application as well as the Respondent’s Payment Schedule and Adjudication Response. The time frame for the Adjudicator’s Determination is strictly 10 business days, unless the parties consent to allowing the Adjudicator additional time.

8. The Act does not allow extensions of time if a party does not comply with the strict time frames and deadlines imposed in the Act. No applications for extensions can be made.


The Regime

9. As soon as you receive a Payment Claim you should immediately diarise the time frame you have to

lodge a Payment Schedule. You should also seek legal assistance as soon as possible as there is

limited time to respond to the Claim and depending on the amount of the Claim, this involves a great

deal of preparation. Respondents to an Application usually do not appreciate the extent of the work

involved in such a short time frame. This will ordinarily include Submissions, Statutory Declarations

with regard to non-payment and confirmation that all subcontractors have been paid pursuant to the

contract, receipts, invoices, timesheets, photos, case law and any other matters a party wishes to

raise as a basis for withholding payment to the Claimant. As indicated above, no extensions will be

granted.

10. The Act provides that a Payment Claim and Payment Schedule are to have sufficient detail and

should include all the issues and matters a party wishes to raise and ventilate in the Adjudication

Application and Response.

11. A party will be excluded from seeking on relying on matters, issues and arguments not previously

raised in the Payment Claim and the Payment Schedule. The Act is explicit on this issue and such is

contained in section 22(2). This is an issue that Claimants and Respondents ordinarily face and there

are no exceptions to this rule. As such it is imperative your Payment Claim and Payment Schedule

contains the requisite detail.


What should a Payment Claim include and what are the requirements pursuant to the

Act?

A Payment Claim:

a) must identify the construction work (or related goods and services) to which the progress payment relates; and

b) must indicate the amount of the progress payment that the Claimant claims to be due, and

c) if the construction contract is connected with an exempt residential construction contract, must state that it is made under this Act.

A Payment Claim may be served only within:

a) the period determined by or in accordance with the terms of the construction contract, or

b) the period of 12 months after the construction work to which the claim relates was last carried out (whichever is the later).

The Act Precludes a Claimant from serving more than one Payment Claim in respect of each

reference date under the construction contract. A Head Contractor must not serve a Payment

Claim on the Principal unless the Claim is accompanied by a supporting statement that declares that

the Head Contractors, employees, subcontractors and suppliers have been paid up to date what

they are owed.


What should a Payment Claim include and what are the requirements pursuant to the

Act?

Recently, the Act was amended insofar that a valid Payment Claim no longer needs to make reference

that it is made under the Act, so watch out, all invoices you receive can now be claims under the Act, even

if they are silent in that regard.

Also, recently, the imposition of providing a supporting statement, imposed on a head

contractor is not similarly imposed on the subcontractors or suppliers of the head

contractor. Accordingly, as a head contractor watch out, the head contractors

subcontractors’ claims are no longer required to be accompanied with supporting statements to

be valid under the Act.


What should a Payment Schedule include and what are the requirements pursuant to

the Act?

A payment schedule:

a) must identify the Payment Claim to which it relates, and

b) must indicate the amount of the payment (if any) that the Respondent proposes to make which is

known as the scheduled amount. If the scheduled amount is less than the claimed amount, the

Respondent in its Payment Schedule must indicate why the scheduled amount is less and (if it is less

because the Respondent is withholding payment for any reason) the Respondent is to set out its

reasons for withholding payment to the Claimant.

If a Claimant serves a Payment Claim on a Respondent and the Respondent does not submit a

Payment Schedule to the Claimant:

a) within the time required by the relevant construction contract; or

b) within 10 business days after the Payment Claim is served, whichever time expires earlier;

c) the Respondent becomes liable to pay the claimed amount to the Claimant on the due date for the

progress payment to which the Payment Claim relates.


What should an Adjudication Application include and what are the requirements pursuant to the Act?

An Adjudication Application must identify the Payment Claim and the Payment Schedule (if any) to

which it relates and must be accompanied by the application fee as determined by the authorised

nominating adjudication authority it seeks to appoint. A Claimant is to nominate an Adjudication authority and pay the fee incidental to that Application.

Ordinarily the Adjudication Application is to attach the Payment Claim, Payment Schedule and may

contain Submissions and references to case law relevant to the application.

However, an Adjudication Application cannot include new matters and issues not previously raised in

its Payment Claim as set out above.


What should an Adjudication Response include and what are the requirements Pursuant to the Act?

An Adjudication Response must be in writing, identify the Adjudication Application to which it relates, and contain such Submissions relevant to the response of the Respondent.

An Adjudication Response may only be submitted provided that the Respondent has served a Payment Schedule on the Claimant within the time specified in the Act and as referred to above. An Adjudication Response is to be served on the Claimant.

A Respondent cannot include in its Adjudication Response any reasons for withholding payment unless those reasons have already been particularised in its Payment Schedule which had been served on the Claimant.


What happens when an Adjudication Application has been Determined and what is the

procedure?

An Adjudicator will issue its Determination either in favour of the Claimant or the Respondent to the Application.

If the Adjudicator finds in favour of the Applicant the Respondent will be liable to make payment to the Respondent. That payment is to be made within 5 business days from the day the Adjudicator’s Determination is issued to the parties or the date the Adjudicator nominates. With regard to the costs of the Adjudication that is a separate issue for the Adjudicator to determine and will either award 100% of its costs to the party the Adjudicator finds in favour of the Determination or apportion it between the Applicant and Respondent.

If a party wishes to appeal the Adjudicator’s Determination an application by way of a Summons and List Statement will need to be filed in the Supreme Court and subsequently served. A party has 5 business days to file such an application from the day the Adjudicator’s Determination is issued to the parties.

You should ensure you seek legal advice at your earliest opportunity to ensure your best case or best Defence is put forward.

If you have any questions regarding this presentation, please contact Turnbull Bowles Lawyers on

(02)8272 1999.


Presented by Pierrette Khoury, Senior Lawyer 13





Documents

Security of Payment Act Guide