NBC3005 Building Law

You have been asked to address the Property Council of New South Wales on the Building and Construction Industry Security of Payments act 1999 (as amended)

 

In particular you have been asked to address the following aspects of the act;

 

1. how does the Act work?

2. Why was it introduced?

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

4. What recent amendments have been made to the Act where a subcontractor of the builder has not been paid by the builder and in particular what rights has the subcontractor in relation to the owner of the property ?

Introduction

The report presented hereunder is based on the topic of Building and Construction Industry Security of Payments act 1999. Building and construction industry is one of the most significant industries of any nation or state. Many classes of people are involved in this industry such as builder, contractors, sub-contractors and so on. This is to inform that the act has developed to secure the interest of contractors and subcontracts in the nation. The motivation behind preparing this report is to address the Property Council of New South Wales on various aspects related to this act. In this report, the aspects related to act such as the manner in which the same works, the role of courts and tribunals, recent amendments in the act are mentioned. The prepared report is attached herewith under the title name Annexure A and this is to hope that the same will prove helpful to the addressee.

How does the Act work?

In this heading, the manner in which the said act works is stated. Total 38 sections are there in this act. The act works as an authority that provides right to an innocent party in a construction contract. Before the development of this act too, right were available to contractors and subcontractors in against of builders and contractors, however, now the rights have a legal ground. The act is majorly focused on the recovery of payments. According to section 5 of the act repair, restoration and extension are also included in the category of construction works. Section 7 says that the act is applicable to every construction contract, no matter that whether the same is in written mode or not. It means the act is also applicable to oral contracts. For every possible confusion in the area of the work contract, the act provides a clarification. This can also be stated that this act is a bundle of rules. Part 3 of the Act provides the procedure for recovery of progress payments. Division 1 of the act is completely focused on the payment schedules and payment claims. Section 11 of the act states the dates on which the payment of a contractor or sub-contractor becomes due. Division 2 provides the way in that adjudications of disputes under this act can be done. The act provided a manner in which a person can ask for his due payments. It means a well-defined procedure is there and one cannot directly seek the final remedies. For instance, a subcontractor first needs to ask the payment schedules and if the contractor fails to provide the same then only the subcontractor can move to the courts for adjudication of his/her claim.

A victim party of a construction/work contract can get the remedy under this act. The act has it is a unique feature that the same itself provides remedies to innocent parties. It means if a contractor fails to make the payment of a sub-contractor, then such subcontractor can serve the payment demand notice to the contractor. He/she can also ask for the payment schedules. In addition to this, a victim party can also knock the door of the court to enforce the remedies granted under this act. This whole act works in this manner.

Why the act has introduced

Every act develops because of such requirements. The same was with Building and Construction Industry Security of Payments act 1999. Before the enactment of this act, some issues were there in construction-related contracts and therefore the victim party was not able to get remedies within the reasonable time. Some other issues were also, there such as lack of knowledge of rights and availability of proper remedies. In addition to this, before the enactment of this act, some a conclusive set of law was missing. The victim parties were depended upon regular courts to seek justice and the courts were unable to entertain so many cases. Cause of this, the proceedings, and decisions, both were being delayed. The regular courts also had other cases apart from the disputes of construction contracts. An act was required to develop that could provide remedies itself and victim parties would not have to look after the court to seek remedies. Further, no legislation was there to determine remedies in case of nonpayment of dues and therefore the courts were used to provide different remedies in each case.

Whenever a law develops, the developers set some objectives of the same and similarly at the time of development of this act, the developers have decided some objective and aims of the act. Some of the lead objectives of this act are mentioned hereunder.

• To ensure that contractors, subcontractors and every other person who provides any services or goods to a construction work, get his/her payment on time.
• People mentioned in aforesaid point can ask for the progress payments even in that situation where noting related to progress payment was contained in the contract
• To provide remedies to innocent parties in addition to the remedies stated in their contract.
• To provide a well-defined procedure for recovery of due payment

There was a need to introduce an act that consists every possible aspect related to a construction work contact and for this reason; it has been decided to develop an act specifically on the subject of construction contracts.

Act and Regular Court Actions

As stated earlier that before the introduction of this act, regular courts were there to provide justice to the victim parties. Now, the act is a complete guide that set out the remedies for the innocent parties. In addition to this, the other rules related to disputes and claim under a construction work are also mentioned under the act. Although remedies are set under the act, yet there is a need of courts and judges. The reason behind is that in addition to the grant of remedy, enforcement of the same is also an important aspect.

Under many of the sections of this act, the role and duties of a court are mentioned. For instance, section 15 if the act says that if a person who was responsible to provide payment schedule (payment in case of absence of payment schedule) then the victim party can ask the due amount in any jurisdiction. It means the remedy is granted under the act but go seek the same; a claimant is dependent on the court. Section 16 further says that claimant can also knock the door of a court if the person liable to make the payment does not pay the same according to the payment schedule.

In conjunction to the above two sections, Division 2 of the act is titled as Adjudication of disputes. If a principal or contractor denies making the payment of the due amount or pays only part of the amount then the claimant can initiate an action against him/her under the court of competent jurisdiction. The whole procedure is mentioned under the act by following the same one can get proper justice. Section 25 of the act provides that the innocent party of a case can file the adjudication certificate as a judgment debt before the court of related jurisdiction.

By reviewing, the aforesaid sections this can be stated that even after the presence of act, courts have their unique functions and the same are highly significant in order to grant justice to the claimant.

Recent Amendments in the Act

The changes in the act or legislation are known as amendments. Amendments are the requirements of changing economic and legal environments. With the passing of time, these amendments become a requirement of every act. In the subjective act also, some amendments have been made in recent years such as in the year 2003 and 2010. The last amendments have been introduced to the act in the year 2013 which are well known as recent amendments. The lead objective behind recent amendments of the act was to grant more securities to the subcontracts; hence, this would not be wrong to state that these recent amendments were majorly focused on the subcontractors. Through these amendments, changes have developed in section 11 and 13 of the act.

Section 11 is one of the most significant sections of the act. According to the provisions of this section, a progress payment under a construction contract becomes due on some specified dates. These dates are mentioned as follow:-

• Within 15 business days from the day of lodgment of payment claim, if the eligible person to receive the payment is a head contractor
• Within 30 business days from the day of lodgment of payment claim, if the eligible person to receive the payment is a sub-contractor.

While protecting the rights of a subcontractor, Subsection 2 of section 11 states that if a contractor would not proceed with the payment of dues to subcontractor within the specified time, then the same will be liable to pay interest also.

Moving towards the section 13 of the act, this is to state that after recent amendments a head contractor is now required to produce a document to principle/owner stating that payment has been made to all subcontractors. This requirement was not there in the act before the amendment.

Rights of Subcontractor in respect of owner: - Some of the times, the contractor take the whole responsibility of a construction work including supply of goods and services and do not make any contract with subcontractors. In such situations, the right of a subcontractor under this act goes with the contractor and he/she can use all the rights and remedies that are available to a subcontract.

Conclusion

This is to conclude that the studied act is very significant. Every section of the act provides important provisions related to construction work. One can get remedy under the act and can apply to the court for the enforcement of the same. Further, some amendments have been done in the act during the recent years and now subcontractor has more rights against the contractors in the comparison of past.

Bibliography

Books/ Journals

Burr, Andrew, International Contractual and Statutory Adjudication (Taylor & Francis, 2017)

Royce, Darryl Adjudication in Construction Law (Informa Law from Routledge, 2016).

Legislation

Building and Construction Industry Security of Payment Act 1999 No 46 (NSW)

Other Resources

Austlii, Building And Construction Industry Security Of Payment Act 1999 - Sect 25 Filing Of Adjudication Certificate As Judgment Debt (2018) < https://www8.austlii.edu.au/cgi-bin/viewdoc/au/legis/nsw/consol_act/bacisopa1999606/s25.html>.

cbp. Once is enough (2018) < https://www.cbp.com.au/Portals/0/140909AKSPaper_Building%20Construction%20Industry-Security%20of%20Payment.pdf>

Davenport, Philip, Michael C Brand and Jinu Kim,  Adjudication In Australia: A Study Of The Building And Construction Industry Security Of Payment Amendment Act 2013  (NSW) <Available from: https://www.asres.net/2015_Conference/Davenport.pdf>.

New South wales Government, Building and Construction Industry Security of Payment Act 1999 No 46 (2018) < https://www.legislation.nsw.gov.au/#/view/act/1999/46/full>.

Oakley, Mills, Building and Construction Industry Security of Payment Amendment Bill NSW (2014) <https://www.millsoakley.com.au/building-and-construction-industry-security-of-payment-amendment-bill-nsw/>.