The Building And Construction Industry Security Of Payments Act 1999 In NSW Ensures Fair Payment.

1 Demonstrate a thorough understanding of how the legal system works in relation to the building industry.
2 Demonstrate a thorough understanding of legal principles relevant to the building industry.
3 Apply understanding of legal principles to analyse and solve practical problems.
4 Write effectively and appropriately, displaying clear and logical structure using Plain English.

Approach to Learning

At the end of each lecture/tutorial a reading guide will be issued for the subsequent weeks lecture/ tutorial as follows:

Inter class discussions to understand and learn legal concepts.

Class exercises will be given. Discussions of these exercises will help students to understand legal concepts for the building industry

Outcome

The Building and Construction Industry Security of Payments Act 1999 (the ‘Act’) is a significant legislative which have been enacted by the government in order to address the key issues relating to payments in construction contracts in New South Wales, Australia. This act aims to administer the entities and individuals operating in constructions industry and who sell goods and services relating to construction in order to ensure that these parties are able to receive the payments within the appropriate time. In this report, the working of the act will be discussed along with analysis of the reasons for which this act was introduced. In this report, how this act works in relation to the actions of regular courts will be analysed. The recent amendments made in the act regarding the rights of sub-contractors will be discussed in this report as well.

The working of this act is focused on the operations of individuals and entities that are related to construction works. This act applies to the organisations operating in both the public and private sector. The act provides a range of time limits on the parties who indulge in operations relating to construction works. This act provides the power to a party in order to secure the payment by making a claim regarding the same. The claim can be made by the party without the assistance of the court, lawyers or other professionals. This act has open new ways for parties to collect their payment in the contracts of construction related work. This act provides the benefit to contractors, sub-contractors, suppliers and other parties who operate in the construction field. The regulations given under this act provides once the proceedings start by filing of a claim by a party regarding non-payment of money which is raised under a construction related contract. The act defines that receiving the payment under a construction contract is considered as a statutory right of the claimant. The regulations of this act provide that even if the contract did not contain any provisions regarding payments in the construction contract, the party still has the right to claim and receive the money.

The provisions regarding the date on which the payment of a construction contract becomes due are given under section 11. This act provides that the process for making the payment begins once the claimant serves a notice regarding the recovery of the payment to the party who owed the money. The party who receives the notice for the payment becomes responsible for making the payment. The reply for such notice is made by the party by giving a payment schedule to the claimant as per the provisions given under section 14. All these provisions are included in the act to impose liability on the party regarding starting the process of payment and giving a payment schedule to the party. In order to increase the seriousness of this act, various penalties are given in this act and penalties which are imposed on the respondent in case he/she failed to make the payment within the appropriate time. It is the liability of the respondent that the reply regarding the payment must be given within ten days. It becomes the responsibility of the party to pay the claimant or provide the payment schedule to the claimant within the prescribed time limit in order to avoid legal consequences.

About Building Law

In case the provisions given under section 14 are breached by a party, then the liabilities are given under section 15 of the act. It provides that after the breach, the respondent will have three options available. The first option is to termination of the contractual work; the second option is to make an appeal for adjudication in the court. The third option for the parties is to make the recovery of the debt. Thus, the provisions of this act cover the liabilities of the contracting parties, however, they are not limited to that, and the process for adjudication in case of a breach is also defined under the act. During the adjudication process, the court focuses on the rights and liabilities of the parties and finds the available remedies as per the regulations gave under the act. Thus, the working of this act focuses on protecting the interest of parties who operate in construction filed and offers their goods and services for construction work which include principal contractors, sub-contractors, suppliers and other parties.

The key reason for the enactment of this act is to secure the payments of contractors, sub-contractors, suppliers and others operations in the construction field. Before the introduction of this act, there is a wide range of rules and regulations which parties have to comply with in order to recover their payment raised under a construction contract. By introducing this act, the government aims to eliminate the challenges which parties face regarding confusing regulations and their application in different cases. The government addressed this issue by introducing a comprehensive act which applies on the parties operating in New South Wales to ensure that contractors, sub-contractors, suppliers and other parties are able to receive their payment under construction related contracts. The parties found it difficult to secure their payment under construction contracts before the introduction of this act. The concept of progress payment is introduced under this act which benefited both parties to the contract. The goal of this act is to eliminate the delay which parties cause while making the payment in construction contracts. It was difficult for contractors, sub-contractors, suppliers and other parties to recover their payment since no rights were given to these parties before the enactment of this act. A procedure was introduced in this act to receive the payment from these parties by giving them the statutory right to recover the payment and imposing the liabilities on other parties.

Working of the Act

Another reason for the enactment of this act was that most parties did not adhere to the time limit when it comes to making the payments. Developers and contractors make their payment in a construction contract after a long period which adversely affects other parties. No guidelines were given which sets a time limit under which the parties are liable to make the payment. However, these issues are addressed under section 3 (2) of the act. This section focuses on securing the payment of a party even if the contract does not contain any information regarding the payment. In the early 1990s, most developers and contractors delayed the payment made under the construction contract in order to get the benefit of free capital. They engage in unfair trading practices in order to delay the payment in construction contracts, and since there was no right given to contractors, sub-contractors, suppliers and other parties, it becomes difficult for them to claim their money. The act was introduced by the government to address these issues in NSW and provide the statutory rights to parties to claim and receive the payments in construction contracts. Therefore, this act is important since it secures the payment of the parties involved in construction-related contracts and protects them from unfair trade practices by recognising their statutory rights to receive the payment and establishing a process for starting the process for payment.

The act issues a range of guidelines which courts have to comply with while providing their judgement. These guidelines are focused on ensuring that parties receive timely payments regarding the goods and services provided by them in construction contracts. The parties have to comply with these provisions in order to avoid the legal consequences which they face relating to their liabilities. There was not appropriate structure established to recover the payment in construction contracts before the enactment of this act which resulted in delay in payments. The advantage of this act is that it reduced the number of disputes which courts have to resolve relating to delay in payments under construction contracts. This act did not prohibit the right of a party to file a suit in the court; however, it has recognised the statutory right of parties which removes various issues relating to delay in payments. While filing a suit in the court, the claimant has the right to prepare the adjudication application without the assistance of any professionals. After recognising the amount of payment in the application by the claimant, it becomes the legal responsibility of the defendant to pay such amount. This amount is determined by the adjudicator, and a certificate is issued to the claimant that is considered in this case as a judgement debt which is given by the court.

Reason for the Introduction of this Act

When a suit is filed in the regular court, then the claimant is required to get an adjudication certificate from the adjudicator. After receiving the certificate, the claimant presents such certificate before the court along with an affidavit in which the amount that is pending is mentioned. The court has the right to issue a judgement debt without any hearing right after receiving all these documents. Moreover, the respondent did not have the right to challenge the amount which is pending. These documents along with the application can be submitted by the claimant in any court which has the jurisdiction to entertain such matter. In order to set aside the order of the court, section 25 (4) provides that the respondent should pay the amount which is pending as the security money. The authority of the regular courts is determined under section 32 of the act which provides that they have the right to entertain cases relating to dispute under construction contracts. Clause (b) of subsection 3 of this act provides that the court has the authority to issue a judgement it is reasonable to provide justice. Therefore, many provisions are given in this act regarding working of this act in relation to regular court actions.

The government has made many amendments to the act in order to recognise and protect the rights of sub-contractors in November 2013. The sub-contractors work under the contractors, and they perform their actions as per the orders given by them. The right to the sub-contractors is recognised under section 11 (1B) of the act which provides the provisions regarding when the progress payment of the sub-contractors become due. Based on these terms, the sub contractors’ rights are recognised by the act to recover the amount under construction contracts. One of the amendments provides that the head contractor has to provide a supporting statement regarding the payment of all sub-contractors in case they file a claim for payment. The liabilities are imposed on the head contractor as well which provides that the court can impose a penalty of $22,000 or imprisonment of 3 months or both in case the head contractor provides a false or misleading statement. Moreover, section 11 provides that after making a claim for the payment, the progress payment should be started by the respondent within a period of 30 days.

If there are no sub-contractors contracts and the head contractors perform their duties, then the head contractor becomes the sub-contractor for the case and acquires all the rights of the sub-contractors. Based on the change of position, the head contractor can be held the owner liable under the court in case the progress payment is not started within a period of 30 days after the application for the payment is made. Section 12A of the Act provides that parties are required to set up a trust account in order to retain the payment of sub-contractors. The government has also made amendments under section 13 of the act by removing the provision of providing a written declaration which was made by the party while claiming for the payment. The parties are not required to mention “Payment under Building and Constructions Security of Payments Act 1999 (NSW)” while filing a claim for receiving the payment. Thus, there are various amendments made by the government in order to recognise the rights of sub-contractors regarding payments to ensure that they are not delayed.

Conclusion

In conclusion, the act is introduced by the government in NSW in order to recognise the right of contractors, sub-contractors, suppliers and other parties to receive the payment for the goods and services offered by them on time. Before this act, these parties find it difficult to receive the payment on time due to unfair trade practices. However, this act has made a claim for the payment as the statutory right of the parties in order to protect the payment. The parties can file a claim in regular court as well because the procedure for adjudication in regular court is also defined under this act. Various amendments made in the act resulted in recognising the rights of sub-contractors which assist them in claiming for the payment. Thus, it is a relevant act which has protected the rights of parties to receive the payment in construction contracts.