Building and Construction Industry Security of Payment Act Report

This report provides a comprehensive analysis of the Building and Construction Industry Security of Payment Act 1999 in Australia. It begins with an introduction by AEC Group Pty Ltd, highlighting the importance of the property industry and the need for regulations. The report delves into the Act's working, explaining its applicability to various construction contracts and its role in addressing payment issues, such as late or non-payment. It explores the reasons for the Act's introduction, emphasizing its aim to ensure timely payments to contractors and subcontractors. The report then examines the Act's functioning concerning court actions, including the power it grants to claimants for securing payments quickly and cost-effectively. Furthermore, it discusses recent amendments related to subcontractor payments, including reduced payment times and the endorsement of payment claims. The report also addresses the rights of subcontractors concerning property owners when payments are withheld by builders, providing a detailed overview of the Act's impact and implications.

Running head: BUILDING LAW
Building Law

BUILDING LAW
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................4
Working of the Act......................................................................................................................4
The Reason for the Introduction of this Act................................................................................5
The Functioning of the Act Concerning the Court’s Actions......................................................6
Recent Amendments related to the Payment of Subcontractors paid by Builders and the
Related Rights concerning the Property Owners.........................................................................8
Conclusion.......................................................................................................................................8
References......................................................................................................................................10
Bibliography..................................................................................................................................12
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Introduction
AEC Group Pty Ltd (AEC) of New South Wales was given with the responsibility of measuring
the impact of Australia’s property industry on its economic culture by the Property Council of
Australia. The property industry of Australia comprises of organizations and individuals who are
engaged in the activities of development, operation, and facilitation in order to meet the needs of
residential as well as non-residential properties. The property industry can be defined as a
substitute of the construction sectors, which mainly contributes to developing the methods of
related services as well as aims to develop residential along with non-residential buildings. In
this regard, the development process of the property includes architectural, production and
professional services. It is further regarded as an operator who operates the matter that is related
to non-residential property and real estate service providers. The group even deals with banking
and operating activities of the property industry. In addition, some sections of banking, non-
banking finance, and funding-related facilities regarding the property industry are undertaken by
ACE department. All these responsibilities are given to this department because it can facilitate
development, achievement, and possession of the property in the nation (AEC, 2017).
An act was been established to regulate the payment issues that are related to building and
construction. The name of the act is the Building and Construction Industry Security of Payment
Act 1999 (Confos, Vicano & Whiteside, 2019). Hence, the paper focuses on examining aspects
of this act thereby understanding the working of this act, the manner it was introduced and it’s
working. Furthermore, its recent amendments will also be examined in relation to the
subcontractors and builders payment issues.
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Discussion
Working of the Act
According to the NSW Government (2017), the Building and Construction Industry Security of
Payments Act 1999 mainly work for construction contracts. The constructions may be in the
form of written, oral or even partly written or partly oral. The act also works when the contract of
construction is undertaken or been expressed to be undertaken by the government except that of
the New South Wales will be administered by the regulation of jurisdiction. There are some
cases where the Act does not apply such as a contract related to construction, which includes
loan agreement, insurance, and guarantee contracts among others that is been accepted by the
financial institution. This financial institution deals with the process of lending money and in the
process to repay money that has been lent out. They also indulge in the process of paying the
money with a guarantee to the person who owes it and also provides insurance in accordance
with the work of construction work that has been undertaken. It has been found that the act is
even responsible for the works that are related to the supply of products/services for the purpose
of construction. The act also focuses on the contract of constructing household buildings that are
subjected to the Home Building Act of 1989. It includes the household property, part of the
property wherein construction was taking place with the aim to use for residential purposes. It
may also deal with a contract of construction that has been undertaken with due consideration
and the work that is carried forth in relation to the supply of various goods as well as services.
Hence, the delivery that is to be calculated by using the reference value of work or goods and/or
services has also been considered under this contract (NSW Government, 2017).
It has been assumed that with the passage of time, the contractors whether small or big will be
able to gather enough knowledge about the Security of Payment Act 1999. This was mainly
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issued to deal with the payment related problems during the contract of property construction.
The act works for “consistent failure in the building and construction industry to ensure that
participants are paid in full and on time for the work they have done, even though they have a
contractual right to be paid” (Brand & Uher, 2009). In general terms, it has been issued to work
for the cases of arbitrary reduction, late payment of the charges, and non-payment of the charges
that have been claimed. The individual who is permanent in construction work often has to face
these problems, which is mitigated with the help of this act (Brand & Uher, 2009).
The Reason for the Introduction of this Act
The aforementioned act was introduced to make sure that if any of the individuals who take on
the process of construction work or even the person who undertakes the job that is related with
the supply of products/services is subjected to varied types of tasks. One of the key purposes of
introducing the Building and Construction Industry Security of Payments Act 1999 was to be
sure that the individuals who indulge on the contract of construction receive their payment
during the progress of the work. This has been permitted by the statutory right in spite of the fact
that whether the contract of construction involves specific conditions of payment during the
progress period. It was introduced to ensure that the individual who is engaged in a construction
contract is able to receive progress payment through the process of making claims, by creating a
provision that will contain the list of the member from whom the payment will be payable and
the amount that is payable. This will even contain the recommendation of any uncertain claim
that may be applied to the person from whom the payment is to be received. The act supported
the entire claim that is entitled to the claimant under the contract of construction or any
additional fact that a claimant may be required in order to recover their entitlement (NSW
Government, 2017).
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The Act was established in order to operate the law in a separate way and on the other hand, it
will be corresponding to the construction contract. In accordance with this act, the claimant may
claim to receive payment according to the contract or according to the act. The payment claims
that are not authorized to be under the act are strictly evaluated as per the provision of the act. It
helps the claimant to provide the right to claim for the payment (Uher & Brand, 2008). In NSW
(New South Wales), the NSW act came into existence in the year 2000 on 26th day of March as a
substitute of New South Wales Government’s policy. It was mainly established to manage the
system or rather to remove the system that was practiced by the developers and contractors that
include delay in paying to the subcontractors as well as suppliers in NSW who are engaged in the
operations of building and construction industry. The NSW Act was amended for three times
after its introduction in NSW, the first amendment took place in 2002, the second amendment
took in 2010 and for the third time, it was amended on the year 2013 (Davenport, Brand & Kim,
2015).
The Functioning of the Act Concerning the Court’s Actions
The security of Payment Act came into existence in order to provide power to the claimant so
that they can use it secure their payment with cost-effective way and in a quick manner without
taking extensive support of the witnesses, lawyers, cross-examinations, court hearings, and all
the other factors that are generally involved in the process of arbitration or litigation. It enables
the claimant to get the final judgment for a progress payment in just a few weeks, which help
them to get the payment. The excess use of the act has to lead to reduce the numbers of cases of
arbitration in the court. The claimant is able to undertake the act in order to achieve the progress
payment in spite of the person who started the proceedings before or at the period of arbitration
or at the time of court proceedings on the claim. According to the Security of Payment Act if any
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individual who works has a claim against the respondent for the payment and it has not received
the payment after 10 days of the claim then the claimant is regarded responsible to pay to the
claimant fully. The claimant is even permitted as per the act to achieve the payments that are still
not recovered from the court of competent jurisdiction. Moreover, the portions of payment,
which are not recovered, are regarded as a statutory debt and the claimant poses the right to
discover it independently. This has been considered irrespective of the terms and condition of the
construction contract (Watson & Watson Solicitors, 2019).
The Government of New South Wales has declared that changes will be applied to the Act of
Security of Payment Act 1999 (NSW). The amendments will be applied to Building and
Construction Industry Security of Payment Regulation 2008 (NSW), which is the Regulation part
of the act and these changes will come into existence from 21st October 2019. The amendment
will take place in two consecutive parts, the first one is an amendment in the act and the second
one is an amendment in regulations and the contractors who are already indulged in any contract
will be managed according to the previous policies. The main amendments that will be applied in
the act are regarding the payment terms, claims, adjudication, penalties, and reference date. The
amendments that will take place with respect to regulations are such as the contract of owner-
occupier construction is been exempted from the policy of security of payment and penalty
notice offences. The Amendment in the Act has provided the court a method through which it
can sever the element of arbitration that has gone under the error of the jurisdiction. The theory
has recently been changed to achieve consideration of judicial decisions in WA, in which a large
number of people under the court of appeal was engaged in the ordinary law values of severance.
It can hence be useful in eradicating the improper section of the rule (Globe Business Media
Group, 2019).
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Recent Amendments related to the Payment of Subcontractors paid by Builders and the
Related Rights concerning the Property Owners
The current amendments made in order to improve the condition of the individuals who are
entitled to claim for the progress payment (Law, 2018). These amendments recently made in the
act involve outstanding dates for payment, endorsement of payment claims, judicial review, and
withdrawal of adjudication applications among others (Globe Business Media Group, 2019a).
The amendment, which has been made with respect to subcontractors who have not been paid by
builders, is in terms of payment that states “maximum time for payment from head contractor to
subcontractor has been reduced from 30 business days to 20 business days”. The act was mainly
made in response to the increasing tendency of jury decisions. The amendment was also made
regarding payments of a claim wherein it has been stated that the claim “must be endorsed with
words that say it is being made under the act in order to enliven the statutory payment regime”
(Earwaker & Hurn, 2019). The privileges that subcontractors have with regards to property
owners when the former is not paid by builders are provided by the latest amended version of
this act. It has given the rights to the claimant against the principal contractor to secure the
payments that are due to the contractor against the contact of property and law of NSW Security
of Payment Act. This implies that the subcontractor has the legal right against the contractor to
file a case against him if he withholds the money or even if the payments of the money are late
(Bannon & Gillard, 2011).
Conclusion
It can hence be concluded that the Act was established to improve the condition of the
subcontractors as well as to safeguard the interest of the claimant so that they get the appropriate
payment on time. This has been especially considered in the recently amended version of this
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act. Hence, it can be said that this act helps to regulate the contract of property and manage the
payment system of the subcontractors so that they can be motivated to work efficiently, which in
turn, can foster the economy as a whole.
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References
AEC, 2017, ‘Property council of Australia’, Economic Significance of the Property Industry to
the New South Wales Economy, pp. 1-38.
Bannon, F & Gillard, M 2011, Subcontractors gain direct rights against principal contractors
under NSW Security of Payment Act, Clayton Utz, viewed 24 September 2019, <
https://www.claytonutz.com/knowledge/2011/march/subcontractors-gain-direct-rights-against-
principal-contractors-under-nsw-security-of-payment-act>.
Brand, M C & Uher, T E, 2009, ‘Background to the ‘security of payment’ issue’, Review Of The
Performance Of Security Of Payment Legislation In New South Wales, pp. 1-17.
Confos, E, Vicano, D & Whiteside, W 2019, Australia: NSW security of payment changes to
commence on 21 October 2019, Mondaq, viewed 24 September 2019, <
http://www.mondaq.com/australia/x/830648/Building+Construction/NSW+security+of+payment
+changes+to+commence+on+21+October+2019>
Davenport, P, Brand, M C, & Kim, J 2015, ‘An analysis of the Amendments introduced by the
building and construction industry security of payment amendment act 2013 (NSW)’, 21st
Pacific Real Estate Society (PRRES) Annual Conference, pp. 1-11.
Globe Business Media Group, 2019, Amendments to the NSW security of payment regime: what
you need to know, Lexology, viewed 24 September 2019, <
https://www.lexology.com/library/detail.aspx?g=de04f257-2e4e-484d-8d6d-5178fe54d428>
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Globe Business Media Group, 2019a, Significant Nsw security of payment amendments to apply
to contracts entered into on or after 21 October 2019, Lexology, viewed 24 September 2019, <
https://www.lexology.com/library/detail.aspx?g=be31e4e4-85ba-4d78-8103-d3b98e787146>
Law, 2018, Amended security of payment regime set to bring more clarity to building and
construction disputes, Society of NSW Journal, viewed 24 September 2019 <
https://lsj.com.au/articles/amended-security-of-payment-regime-set-to-bring-more-clarity-to-
building-and-construction-disputes/>.
Earwaker, M & Hurn, I 2019, Australia: Amendments to the NSW security of payment regime:
what you need to know, Mondaq, viewed 24 September 2019, <
http://www.mondaq.com/australia/x/839716/Building+Construction/Amendments+to+the+NSW
+security+of+payment+regime+what+you+need+to+know>
NSW Government, 2017, Building and construction industry security of payment act 1999 no 46,
NSW Legislation, viewed 24 September 2019, <
https://www.legislation.nsw.gov.au/#/view/act/1999/46/full>.
Uher, T E & Brand, M C 2008, ‘Overview of the act’, Impact Of The ‘Security Of Payment’ Act
In New South Wales On Clients, Contractors And Subcontractors, pp. 1274- 1286.
Watson & Watson Solicitors, 2019, Security of payment act, W&W solicitors “When Experience
Matters”, viewed 24 September 2019,
<http://www.watsonandwatson.com.au/service-15/security-of-payment-act>.
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Bibliography
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Taylor & Francis, England.
Royce, D 2016, Adjudication in construction law construction practice series, CRC Press, US.
Tiley, D I 2012, Divided we fall: an insider’s perspective on local government amalgamations,
Xlibris Corporation, United States.
Ward, P B & Ryan, M, 2007, Local government records in New South Wales: control,
management, preservation, and use : papers from a workshop and seminar, 15 and 16 October
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