Building and Construction Industry Security of Payments Act 1999

This report evaluates the operations, purpose, role and recent amendments of Building and Construction Industry Security of Payments Act 1999 in New South Wales, Australia. The act provides various methods for securing the payment of a party which is carrying out the construction work. The main objective of this act is to avoid the delayed in the payment of principal contractor, subcontractor and other parties after it becomes due. The provisions of this act work as a guide for the court and other parties to ensure the timely payment for products and services which are given in construction contracts. Various amendments have been introduced by the government in the act in order to protect the rights of subcontractors and ensure that their payments are not delayed.

Building Law

Table of Contents
Introduction...............................................................................................................................2
Operations of the Act.................................................................................................................2
Purpose of the act......................................................................................................................3
Role of the act in regular court actions......................................................................................4
Recent amendments in the act..................................................................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................7
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Introduction
There are a wide range of methods, regulations, and provisions given under the Building and
Construction Industry Security of Payments Act 1999 (hereinafter referred as ‘Act’) which are
focused on achieving the overall objective of the act. This act applies in New South Wales,
Australia. The purpose of this act is to govern the operations and actions of an individual
who is selling or supplying goods or services in the area relating to construction work and
ensure that such person receives the payment right after they become due. This report will
focus on evaluating how this act works and why it was introduced. Furthermore, the
working of this act will be analysed in relation to the regular court actions, and recent
amendments will be discussed.
Operations of the Act
Firstly, the act applies to the operations of organisations and individuals’ operating in both
the public and private sector and it focuses on imposing time limits on different situations.
The act enabled a person to secure his/her payment and made a claim on the same without
the assistance of lawyers, courts or any other professionals. The act provides various
methods for securing the payment of a party which is carrying out the construction work.
While assessing the role of this act, it is important for parties to determine the ways it
works. The proceedings start in this case in case an issue of non-payment of money raise in
which a party has a valid claim (Gray, 2012). The act provides that the claimant has a
statutory right to claim and receive a valid payment and this right is available in those cases
as well in which the contract does not contract contains any terms regarding the payment.
Section 11 of the act provides provisions regarding the date on which the payment for the
products or services in construction work becomes due, and the claimant gets the right to
serve a notice to the party that owed the money to start the process of the payment. After
receiving the notice, the party to whom the notice is server becomes responsible for making
such payment, and such party can replay with a payment claim based on providing a
payment schedule as per the provisions of section 14 (Brand and Uher, 2010).
The act also provides regulations regarding the imposition of penalties on the respondent
along with the liabilities of the party to make the payment on time. The act also provides
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that the party has the responsibility to reply to the claim for payment within ten days or else
it becomes the responsibility of the party to progress the payment claims. The process in
which the payment claim is moved due to non-compliance with the provision of the act is
defined as well. Section 15 provides three options which the respondent will have in case
he/she violates the provision of section 14 by failing to provide a payment schedule which
includes termination of the work, making of an adjudication application and recovery of the
debt (Bailey, Bell and Bell, 2011). Along with providing the rights and liabilities of parties,
the act also provides the adjudication process which is used by the court to provide
judgement on these matters. Firstly, the act focuses on the rules which are associated in this
case along the rights of the claimant and the available remedies (Gray, 2012). Therefore, the
main goal of this act is to protect the interest of individuals who offer services or products
while operating in the construction sector based on which the rights of principal contractors
are involved in this act as well.
Purpose of the act
The main purpose of introducing this act is that sub-contractor lobby groups were operating
in Australia which focuses on securing the payments of sub-contractors. In order to address
this issue, many laws were enacted in Australia in various states. Due to the enactment of
different legislations, parties were more likely to get confused between their application and
provisions. Therefore, in order to address this issue, a comprehensive act was introduced in
1999 by the government of NSW to ensure the payment of principal contractor, sub-
contractor along with other suppliers of goods and services which operate in construction
field (Brand and Davenport, 2012). Before the enactment of this act, there were no
guidelines established regarding the security of the payment. Moreover, this act introduced
various regulations related to progress payment for achieving its main objective. The main
objective of this act was to avoid the delayed in the payment of principal contractor, sub-
contractor and other parties after it becomes due. Previously, there was not right given to
these parties based on which they could demand damages or suspend their work; the act
resulted in defining the rights of parties and establishing a procedure to recover the
payment for goods and services (Ross, 2013).
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The time frame of a project is a crucial element in work contracts, and most contractors or
developers make the payments regarding construction works after a long period of time.
There were no provisions regarding the time limit in which parties have to make the
payment for goods and services, and this act focused on setting such limits. Section 3 (2)
provides guidelines to secure the payment of a party even if no provisions are included in
the work contract (Legislation, 2018). Before the enactment of this act, there was no
procedure prescribed regarding claims for the payment. While enacting this act, the
government of NSW focused on practical issues which were present before this act. The
delay in the payment was the major issues in the early 1990s by contractors and developers
since they wanted to get the benefit of free capital. In order to eliminate these unfair
trading practices, this act was introduced by the government (Gray, 2012). Conclusively, this
is an important act which ensures that payments for goods and services are made timely by
parties to contractors, sub-contractors and other parties by implementing effective policies.
Role of the act in regular court actions
The provisions of this act work as a guide for the court and other parties to ensure the
timely payment for products and services which are given in construction contracts. The act
enforces the parties to mandatory comply with its terms in order to avoid legal liabilities
which arise due to the violation of this act. Before the enactment of this act, parties have to
go to the court in order to enforce the payment which resulted in delaying the payment
even further. Moreover, one of the key advantages of this act is that it has reduced the
number of disputes which are brought before the courts by parties regarding the issues
relating to payment. However, this act did not prohibit the parties from going to the court in
case of an issue. The claimant has the right to seek remedy under this act even when the
proceedings are going under a court. The act provides the right to the claimant to prepare
the adjudication application (Evans, 2016). When an application to determine the amount of
payment is made by the claimant, then the same becomes the responsibility of the
adjudicator as well. After determination of the due amount by the adjudicator, the claimant
is required to obtain this certificate which is considered as the judgement debt issued by the
court.
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In case of regular courts, the claimant first required to get an adjudication certificate which
is issued by the adjudicator after which the claimant is required to present this certificate
with the court along with an affidavit in which the pending amount is mentioned. After
receiving these documents, the court has the right to issue its judgement without calling the
hearing. The act also provides that the respondent who did not agree with the amount of
the payment did not have the right to challenge it during the adjudication of the court.
Moreover, the claimant has the right to submit the adjudication certificate in any court
which has the competent judgement over the particular matter. As per section 25 (4) of the
act, if the respondent wanted to set aside the order of the court, then he/she is required to
pay the pending amount as security money. The impact of civil proceedings in these matters
is given under section 32 of the act which provides that the court has the authority to
entertain any issues which arise due to dispute relating to the construction contract. As per
the clause (b) of section 32 (3), the court has the authority to provide judgement which it
deemed fit and reasonable to provide justice to parties in the cases related to construction
contracts (Austlii, 2018). Therefore, it can be concluded that courts play a crucial part in the
implementation of this act and providing its benefits to the claimant.
Recent amendments in the act
In November 2013, the government has introduced various amendments to the act. The
sub-contractors operate under the head contractor, and they did not directly work under a
developer or principal. These parties work for the contractor and manage their functions as
per their orders. Section 11 (1B) of the act provides provisions regarding when the progress
payment of a sub-contractor becomes due while operating under a construction contract
(Legislation, 2018). Moreover, rules are given under section 12A which focus on the
establishment of a trust account regarding retention of the money of sub-contractor. Other
amendments have been made in the act under section 13 in which the requirement to
provide written declaration for the claim of payment has removed from the act. Based on
this amendment, the parties are not required to mention “Payment under Building and
Constructions Security of Payments Act 1999 (NSW)” on a payment claim. The changes
made in section 13 have a wide impact on the act.
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Another amendment provides that the head contractor has to make a supporting statement
in order to make the payment to all sub-contractors in case a claim is made by the sub-
contractor to claim the payment. Furthermore, if the head contractor makes a false or
misleading statement, then the court can award a fine of $22,000 or imprisonment of 3
months or both (Fairtrading, 2018). Section 11 of the act also provides that the progress
payments of the sub-contractors are beginning within a 30 days counting from the date on
which the claim for payment was made. In case an owner-contractor operates along with a
head contractor and the head contractor perform all the duties of the sub-contractor, then
the head contractor becomes the sub-contractor for this act. After becoming a head
contractor cum sub-contractor, all the rights are received by the party against the owner
based on which the proceedings can be filed in case the progress of payment is not started
by the owner in 30 days after submitting the application. Therefore, various amendments
have been introduced by the government in the act in order to protect the rights of sub-
contractors and ensure that their payments are not delayed.
Conclusion
Based on the observations, it can be concluded in the report that this is a significant act
which has provides various provisions to protect the rights of contractor, sub-contractors,
suppliers and other parties. The policies before the enactment of this act were not focused
on protecting the rights of individuals. After the introduction of this act, the parties who
services in construction works or offer their goods have received various rights which also
include the right to start proceedings before regular courts to enforce their right to receive
compensation. Moreover, the recent amendments made in this act have recognised the
rights of sub-contractors, and various provisions are given to protect those rights. Therefore,
this is a significant legislature which ensures that contractors, sub-contractors and other
parties receive their payments on time without causing a delay which ensures the
protection of their rights.
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References
Austlii. (2018) Building and Construction Industry Security of Payment Act 1999. [Online]
Available at: http://www8.austlii.edu.au/cgi-bin/viewdb/au/legis/nsw/consol_act/
bacisopa1999606/ [Accessed 20/09/2018].
Bailey, I.H., Bell, M. and Bell, C. (2011) Construction law in Australia. Pyrmont, NSW:
Thomson Reuters.
Brand, M.C. and Davenport, P. (2012) Adjudication in Australia: An analysis of the
amendments introduced by the Building and Construction Industry Security of Payment
Amendment Act 2010 (NSW). International Journal of Law in the Built Environment, 4(3),
pp.189-202.
Brand, M.C. and Uher, T. (2010) Follow-up empirical study of the performance of the New
South Wales construction industry security of payment legislation. International Journal of
Law in the Built Environment, 2(1), pp.7-25.
Evans, P. (2016) Statutory Review of the Construction Contracts Act 2004 (WA). U. Notre
Dame Austl. L. Rev., 18, p.124.
Fairtrading. (2018) Building and Construction Industry Security of Payment Amendment Bill
2018. [PDF] Available at:
https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0009/396513/Exposure-draft-
Bill-Building-and-Construction-Industry-Security-of-Payment-Amendment-Bill-2018.PDF
[Accessed 20/09/2018].
Gray, J. (2012) Property law in New South Wales. 3rd ed. New York: LexisNexis Butterworths.
Legislation. (2018) Building and Construction Industry Security of Payment Act 1999 No 46.
[Online] Available at: https://www.legislation.nsw.gov.au/#/view/act/1999/46/full
[Accessed 20/09/2018].
Ross, S. (2013) Security of payment legislation in Australia: issues with adjudication
decisions. The Journal of New Business Ideas & Trends, 11(1), p.47.
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