Detailed Analysis: Building and Construction Security of Payments Act

This report provides a detailed analysis of the Building and Construction Industry Security of Payments Act 1999, enacted in New South Wales. The report examines the Act's purpose: to address payment issues faced by contractors, subcontractors, and suppliers in the construction sector, ensuring timely payments. It explores the Act's operational mechanisms, including statutory rights and time limitations. The report also evaluates the role of regular court actions under the Act, including adjudication processes and the rights of parties involved. Furthermore, it analyzes recent amendments introduced to protect subcontractors, ensuring they receive payments and understand their rights. The report concludes by highlighting the Act's significance in promoting fair practices and economic growth within the construction industry.

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Construction Management

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Table of Contents
Introduction...............................................................................................................................2
Working of this Act.....................................................................................................................3
Purpose of introduction of the Act............................................................................................4
Working of the Act relating to regular court actions.................................................................5
Recent amendments for Subcontractors...................................................................................6
Conclusion..................................................................................................................................8
References..................................................................................................................................9

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Introduction
In this report, the “Building and Construction Industry Security of Payments Act 1999”
hereinafter referred as the “Act” will be analysed, which is introduced by the government of
New South Wales. Through this Act, the government aims to address key issues which are
faced by contractors, sub-contractors, and suppliers when they receive their payment while
offering their products and services (Kallipolitis, 2019). This report will focus on analysing
the role of this Act in ensuring timely payments of different parties in the construction
sector of New South Wales by understanding how this act works. This report will also
evaluate the reasons for introduction of this Act by the government and determine the
reason for its introduction. The working of this act in relating to the operations of “regular
court actions” will also be analysed in this report. Lastly, the amendments which are
introduced in this Act for protection of the rights of subcontractors by ensuring timely
payment from builders will be analysed along with evaluation of rights given pursuant to
this Act to subcontractors in relating to ownership of the property.

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Working of this Act
The provisions of this Act apply on individuals and entities operating in both public and
private sector, and it is focused on introducing policies that are targeted towards
implementing time limitations on parties and different scenarios. Through this Act, the
government aims to ensure that parties receive the payment for the products and services
which they offered within the given timeframe (BackerMcKenzie, 2019). The provisions of
this Act allow parties to freely move cash in this section which supports the economic
growth of the country as well since not receiving payment at all or not receiving it within the
given timeframe is a key challenge faced by parties while offering construction relating
services in the country. This Act works by giving statutory rights to parties by making sure
that they receive their payment for products and services within the given timeframe. This
can be understood by the provisions given under section 14 of this Act in which provisions
regarding payment schedule is given (Austlii, 2019). These provisions apply to the
operations of contractors, subcontractors and other parties who are involved in these
practices.
This Act implements liability on parties through which other parties receive the right to
receive payment. Under section 15, the provisions regarding penalties are given for parties
that failed to ensure that the payment is made to other parties of the contract as per the
time mentioned in the payment schedule (Bowyer, 2018). This section also includes
provisions for terminating the contract due to failure of payment by parties. The working of
this Act also provides rights to parties to make an appeal in the court for enforcing their
payment. The working of this Act is become stricter for protection of rights of parties by
introduction of the “Building and Construction Industry Security of Payment Amendment Bill
2018”. The amendments are targeted towards ensuring that parties pay on due dates and
they are able to receive their payments without getting help from third parties (SSO, 2018).
The government has purposefully ensured that the working of this Act remain simple so that
the parties did not get involved in legal issues as a result of delayed payment which is made
by parties in construction related contracts.

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Purpose of introduction of the Act
There were a number of challenges faced by individuals and entities operating in Australia in
the construction sector relating to contractual issues since they find it difficult to receive
payments on due dates. Therefore, the motive of the authorities for the introduction of this
Act was to make sure that right of parties involved in this industry such as contractor,
subcontractors, and others remains protection (Evans, 2016). This was further illustrated
under section 3 of this Act. It provides that the main purpose of to ensure timely payment
by parties. This is achieved by ensuring that parties receive statutory entitlements which are
given to them under construction related contracts. This Act protected the parties even
when they did not include specific provisions for payments in their construction related
contracts. This Act also provides provisions for scheduling of payment decides by parties,
and they also receive the right to bring their dispute for adjudication. Furthermore, the
purpose of this Act was not to limit the parties or their rights to receive remedies which
allow them to recover their dues from other parties.
This Act is also targeted towards ensuring that subcontractors’ rights are not violated by
defaulting contractors that engage in illegal practices while conducting their business
operations. For example, until a subcontractor withdraws his/her claim, the principal
contactor cannot withdraw the claim for payment. After the claim becomes successful,
reasonable opportunities are available for the subcontractor to receive payment for his/her
services (Hughes, Champion, and Murdoch, 2015). These rights are recognised under the
Contractors Debts Act 1997 as well. This is an important Act since it resulted in ensuring the
timely payment of dues in construction contracts. Contractors avoid giving payment to
subcontractors on time to make sure that they use such capital for investing in their
business operations since subcontractors had to engage in a number of legal practices that
delayed the payment further. However, this issue is addressed by the government through
these provisions by eliminating proceedings that were slow and introducing efficient legal
practices (BackerMcKenzie, 2019). This objective is achieved by introduction of a
comprehensive Act that is targeted towards protecting the rights of contractors and
subcontractors.

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Working of the Act relating to regular court actions
Provisions regarding the working of operations of regular courts are given under this Act and
courts have to comply with these guidelines as well. Provisions are given under section 13
which allow parties to make payment claims. Furthermore, there are provisions
implemented for parties relating to progressing and receiving payments under section 8 (1)
which make sure that entitlements of both contractors and subcontractors remain
protected (Evans, 2016). Failure to receive payment within the decided timeframe gives the
right to parties to make a claim that can be against the head contractor for the payment. In
regular courts, disputes can be adjudicated, and provisions regarding these policies are
given under Division 2. As per section 17, application for adjudication application can be
made by parties. Parties submitted this application when they did not receive payment
according to their decided schedule (Legislation, 2019). Furthermore, provisions are given
under section 18 which guides contractors and subcontractors when they submit their
application in regular courts. As per this Act, the adjudicator that handles those cases is
referred to the person who has adequate expertise, experience, and qualification to handle
these issues. The appointment of the adjudicator can be made through serving of
adjudication application under section 19 of the Act. Provisions regarding the working of
adjudicator are given under section 20-22. It is important that the adjudicator application
must have made within a period of five working days or within two days after the notice of
adjudicator is received by the parties or whichever time period is earlier as given under
section 20 (Austlii, 2019).
A restriction is imposed on the adjudicator under section 21, which provides that the
application cannot be determined until the period is completed within which the response
for adjudication application is lodged by the respondent. A right is given to the adjudicator
to demand from parties’ written submission of relevant information, call for a conference,
set deadlines for them or carry out inspection on the matter. Furthermore, rights are given
to the adjudicator to determine the amount for interest or payment date for the parties.
Moreover, liability can be imposed on the respondent of the case in order to make the
necessary payment within the given timeframe under section 23. The provisions regarding
consequences which are imposed on the parties of the case are given under section 24. In
case a party denied making the payment, then aggrieved parties can submit adjudication

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application in regular courts as the judgement debt which can be enforced by the courts
under section 25 (Legislation, 2019). The parties have to submit other relevant documents
along with affidavit with the application in the regular court. The parties can also ensure
that the adjudicator of their case is changed in case of specific circumstances for which
application can be submitted under section 26 of the Act.
Recent amendments for Subcontractors
The government has introduced a range of amendments in the Act which are targeted
toward protecting the rights of subcontractors and ensuring that they receive payment for
their products and services within the set timeframe. Under division 2A of the Act, rights are
introduced for claimants under which principal contractors (Earwaker and Hurn, 2019).
Under this division, section 26A provides principal contractor is obligated to make an
application for ensuring that due payment is received by the claimant. Along with this
application, the party is also obligated to make sure that they submit a declaration of
genuineness. This declaration is made for the claimant involved in the case. As per
subsection 5 of this Act, the process of receiving the payment the parties must be started
within a period of 10 days (Legislation, 2019). Liability is imposed on the contractor to make
sure that he retains money for subcontractor for making timely payments under section
28B. This obligation applies to the contractor until the subcontractor withdraws his/her
application. This obligation is also withdrawn in case a notice is served under section 6 of
the Contractors Debts Act (Legislation, 2019).
This can also be eliminated in case 20 days had elapsed when the principal contractor
received a copy of the adjudication application. Amendments are also made under section
11 (1B) which gives the rights of the subcontractor for making a claim for receiving due
payment within the given timeframe. As per section 11, the process of making the payment
should be started within 30 days after the subcontractor has made a claim for payment
(Austlii, 2019). Supporting evidence is necessary for the subcontractor to submit along with
the claim. Along with these policies, there are various provisions are given for penalties on
parties that violate these provisions. As per these penalties, the breaching party can face
imprisonment of three months or a fine of $22,000 can be imposed or both. When
subcontractor is not present in a particular scenario, then all these rights are received by the

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contractor (Kallipolitis, 2019). These amendments are targeted towards ensuring that rights
of subcontractors remain protected in construction related contracts.

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Conclusion
Based on the above observations, it can be concluded that the introduction of “Building and
Construction Industry Security of Payments Act” is targeted towards ensuring that rights of
parties involved in construction related contracts are protected and they are able to make
sure that they receive their payment within the given timeframe. The working of this Act
focuses on providing simple policies for parties to make sure that they recognise the rights,
and they are able to take corrective actions which allow them to receive payment on due
dates. The purpose of introduction of this Act is to eliminate illegal and unethical practices
in the construction industry and providing stricter laws that are targeted towards protecting
the rights of parties such as contractors, subcontractors, and others. Various provisions are
also introduced in this Act regarding actions taken by regular courts to make sure that
parties are able to protect their rights without facing the issue of long legal proceedings.
Lastly, various amendments are introduced by the government, which is targeted toward
ensuring that subcontractors are able to protect their right of receiving complete payment
within payment schedule. Through these amendments, subcontractors can claim payment
of their money, and they can receive them without any delay which shows the significance
of this Act.

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References
Austlii. (2019) Building and Construction Industry Security Of Payment Act 1999 - As at 19
July 2019 - Act 46 of 1999. [Online] Available at:
http://www8.austlii.edu.au/cgi-bin/viewdb/au/legis/nsw/consol_act/bacisopa1999606/
[Accessed 24/09/2019].
BackerMcKenzie. (2019) Announcement of Building and Construction Industry Security of
Payment Amendment Act 2018 Commencement Date. [Online] Available at:
https://www.bakermckenzie.com/en/insight/publications/2019/08/announcement-of-
building-and-construction-industry [Accessed 24/09/2019].
Bowyer, K., 2018. Improved Security of Payment Legislation and Project Bank Accounts: A
Joint Solution to Payment and Insolvency Issues in the Construction Industry. U. Tas. L.
Rev., 37, p.52.
Earwaker, M. and Hurn, I. (2019) Australia: Amendments to the NSW security of payment
regime: what you need to know. [Online] Available at:
http://www.mondaq.com/australia/x/839716/Building+Construction/Amendments+to+the+
NSW+security+of+payment+regime+what+you+need+to+know [Accessed 24/09/2019].
Evans, P., 2016. Statutory Review of the Construction Contracts Act 2004 (WA). U. Notre
Dame Austl. L. Rev., 18, p.124.
Hughes, W., Champion, R. and Murdoch, J., 2015. Construction contracts: law and
management. Abingdon: Routledge.
Kallipolitis, N. (2019) New Building and Construction Industry Security of Payment Act.
[Online] Available at: https://www.colemangreig.com.au/BlogPost-1306-new-building-and-
construction-industry-security-of-payment-act.aspx [Accessed 24/09/2019].
Legislation. (2019) Building and Construction Industry Security of Payment Act 1999 No 46.
[Online] Available at: https://www.legislation.nsw.gov.au/#/view/act/1999/46 [Accessed
24/09/2019].

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SSO. (2018) Building and Construction Industry Security of Payment (Amendment) Act 2018.
[Online] Available at: https://sso.agc.gov.sg/Acts-Supp/47-2018/Published/targetText=An
%20Act%20to%20amend%20the,of%20the%202006%20Revised
%20Edition).&targetText=1.,by%20notification%20in%20the%20Gazette. [Accessed
24/09/2019].