Building and Construction Industry Security of Payments Act of 1999 as amended

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A Paper to the Property Council of New South Wales on the Building and
Construction Industry Security of Payments Act of 1999 as amended
The workings of the Act
The Building and Construction Industry Security of Payments Act of 1999 (the Act) came
into place to ensure that any participation into construction work, on the strength of a contract
to that effect, rendered entitlement to receiving of remunerations and enabled recovering of
progress payments if the deal does not compete. Empirical studies1 on the Act undertaken
over time acknowledged that delayed payments had been a core element within the
construction industry. However, there has a consistent notice of steady digression of this
trend since 2004. In light of this, it is crystal clear that endorsement of payment claims paves
the way for dispute evasion and resolution vide the consequential effective communication
amongst parties to a construction contract.
The Act in its form and detail is yet to be well exposed to subcontracting organizations;
this brings the misfortune of affected parties being disabled of its full benefits. The
adjudication process is predominantly utilised but not as a way of payment recovery.
Introduction of the Act
August 2001 marked commencement of an extensive inquiry into the Australian building
and construction industry.2 It was the first of its kind3 and looked into security payment
among issues. Security of payment denotes the entitlement of players within the construction
industry to subsidies from their superiors.4 Therefore, the question behind security of
1 The studies were taken between 2004 and 2007 according to Michael C.Brand
and Thomas E. Uher in
Review of the Performance of Security of Payment Legislation in
New South Wales.
2 The inquiry was done by a Federal Royal Commissioner appointed by the
Honourable Terence Cole.
3 Cole, 2003.
4 NSW Government (1996) p. 41.
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payment is the steady mishaps in the building and construction industry as regards complete
and timely payment despite entitlement.5 In the words of an NSW government official:
In most reported cases show that small subcontractors do not get paid for their work.
Many of them cannot survive financially when that occurs with severe consequences to
themselves and their families. The Government is determined to rid the construction industry
of such totally unacceptable practices.6
Moreover, it was the issues behind the security of payment within the building and
construction industry in New South Wales that birthed the Act. Its purpose is spelled out
under its Section 3 as follows:
To ensure that any person who agrees to carry out construction work (or who decides to
supply related goods and services) for a construction contract is entitled to receive, and can
recover progress payments concerning the carrying out of that work and the supply of those
goods and services.
New South Wales became the first state in the Australian to bring into force this kind of
law. By the year 2002, only New South Wales and Victoria7 were distinguished in this light.
The Victorian law was similar to the Act as unamended.
The Act Vis a Vis regular Court Actions
With the Act came adjudication of disputes arising from a construction contract
overpayment amounts. Parties to the adjudication process are claimant(s) and respondent(s),
with the former being the aggrieved party, thus appears as Claimant(s) versus Respondent(s).
In an adjudication process, an objective and autonomous adjudicator decides on the
amounts payable to a claimant by a respondent. It is only the former that can bring the
5 Commonwealth of Australia (2002) p. 7.
6 NSW Minister for Public Works and Services, Hon. Morris Iemma (1999).
7 Building and Construction Industry Security of Payment Act (2002) (Vic).
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