Analysis of the Security of Payments Act (SOPA) in NSW

This report provides a comprehensive analysis of the Building and Construction Industry Security of Payments Act 1999, also known as SOPA, focusing on its application within New South Wales (NSW). The report examines the act's purpose, which is to reduce bankruptcies in the construction industry by providing a clear process for progress payments and protecting contractors' rights. It details the procedures for making payment claims, the role of payment schedules, and the options available to claimants, including adjudication and court proceedings. The report also addresses the Act's key application areas, including consultants, architects, and builders. Furthermore, it explores the protection provided to construction workers, the conditions for using the Act, and the definition of construction work covered by the Act. The report concludes with a discussion of the amendments made to the Act over time, including those aimed at streamlining payment processes and preventing fraudulent claims.

Running Head: SOPA 0
Security of Payments Act.
Business and Construction Industry Security of Payments Act, 1999
Student Name
Student Number

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Table of Contents
Security of Payment Act............................................................................................................2
Question 1:.............................................................................................................................2
Question 2:.............................................................................................................................5
Question 3:.............................................................................................................................7
Question 4:.............................................................................................................................9
Conclusion................................................................................................................................10
References................................................................................................................................11

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Security of Payment Act
In NSW Property Council, the topic of discussion of this segment shall be the Building and
Construction Industry Security of Payments Act, 1999 and the amendments made herein in
the later years. This
The Building and Construction Industry Security of Payments Act, 1999 also widely known
as Security of Payment Act (SOPA) is a specific legislation for New South Wales (NSW). It
has been amended various times through the years as per the requirements. This act came into
existence with the thought of reducing the common occurrence of bankruptcy in the
construction industry. This act does so by; advising a proper method that is recognized by
statutes to recover progress payments; and also, provide contractors with protection and
specific rights (Lawpath, 2016).
It is a convenient and cost-efficient process that helps the consultants, suppliers, contractors,
sub-contractors and people as such. It safeguards the continuity of payment to the workers of
construction industry who have a validated construction industry contract. Every state and
territory throughout Australia, has adapted to this legislation of security of payment, though,
there are some dissimilarities from state to state (Turtons, 2019).
Question 1:
The first thing here that needs to be done, is to identify that the claim or the contract has a
clause stating it, to be allowed under SOPA, or if it allows taking action under the
abovementioned act.
It basically starts with the mention of a reference date, this date is set by both the parties to
the claim mutually. If a date is not set mutually, a default date will be set, which is after a
period of a month, preferably by the end of the month; from the last payment or, from the
date the work was completed or goods were delivered (Masson, 2018).

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Within 10 days of payment claim being served, the respondent has to serve a payment
schedule. In cases where, the payment schedule is not served in order by the respondent as
well as when the amount due is still unpaid, the claimant can discontinue the work after
providing a 2 days business notice. Now the claimant has two options, either to go ahead with
adjudication or to proceed with court proceedings, where they can file a section 15 summary
as summary judgement. When the claimant proceeds with the adjudication, as per the section
17(2), the claimant is supposed to submit the adjudication notice 20 days after the due date of
the payment has passed and the amount has not been paid yet. After which the respondent has
to reply to the adjudication notice within 5 business days from when it is received with a
fixed payment schedule.
Now what happens when the respondent, within 5 days, does not tend to the order of serving
the payment schedule or if the payment schedule served is not adequate and rejected by the
claimant?
The claimant can then serve an adjudication application within 10 days after waiting for the
respondent to respond.
If the payment schedule has been accepted by the claimant then on the due date if the
respondent does not pay the amount due, then the claimant shall file for the adjudication
application within 20 business days after the due date. If the court proceedings are opted for
the claimant then they shall file a Section 16 Summary Judgement (Building & Construction
Industry Security Of Payments Act: Powerful Legislation, 2019).
A proper flowchart describing the above description is given below:

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Source: (Adjudicate Today, 2019)

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The Architects, as per this Act, have major three application areas; Consultant is pursuing
payment in areas where architect is involved; The payment is pursued by the architect; and
where builders are pursuing their payment where the superintendent is the architect.
The Act (SOPA) is easily available on the territory and state legislation websites. Every
territory and state legislation have their own different version of the Act (Contracts Specialist,
2019). Hence, before application, the state or territory’s version of the Act needs to be
thoroughly gone through (Macindoe, 2015).
Question 2:
SOPA (Security of Payments Act) was introduced to protect the construction worker’s rights
and to provide cost efficient as well as time efficient process in cases where workers were
treated unfairly regarding their payments.
It works as a legislative authority that provides the rights of the construction workers
regarding payments for work, material delivered (if any) or even if any services are provided
amongst the one’s mentioned in the act. In cases where the claim for the work has been
denied to workers, it protects their right to enter a judgement at court and if the claim is
disputed, then adjudicator appointed by the government shall come into the picture and try to
resolve the dispute. A worker can stop working if unpaid or underpaid without disrupting the
contract. One can also challenge back for the charges for the variation being carried out or
even for retention. Allegations such as the worker’s goods or services being defective can be
easily disputed and challenged back through this act (Building & Construction Industry
Security Of Payments Act, 2019).
The ultimate purpose of the aforementioned act is to provide help to the people involved in
working being fully paid for the services they provide or even the goods they deliver (if any),

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in the construction and building industry. Another important aspect of this act is to be gained
mainly by—
(a) requiring certain contracts of building in order to utilize it for project bank accounts,
secondly,
(b) granting the allotment for payments in progress, despite the provision regarding the
relevancy of progress payments in the contract; and
(c) initiating a procedure to make claims for payment or even responding to the same. Also,
the procedure to adjudicate the payment claims in question or in general sense the disputed
ones along with the claimed amount’s recovery and also authorizing the utilization of
statutory charge in favour of the payment for work done by the subcontractors ( Building
Industry Fairness (Security of Payment) Act 2017 Queensland, 2019).
Under the Section 8 of the Act, the progress payments are entitled to the contractors despite
the fact that whichever form the contract is in be it, written, absent or even verbal; also if the
contract does states in a clause that progress payments cannot asserted by the contractor, they
are entitled to the progress payments of the services or goods they have provided (NSW
Government, 2019).
Another important aspect of the Act is when the construction work is completed be it in
services form or even if goods were involved, by the contractor and a payment claim has
been served, in the next 10 days the claimant can expect either the full payment of the receipt
of the claim or a payment schedule from the respondent (the one from whom the amount is
expected). The information regarding the act’s convenience and ease is not known by all the
workers, hence resulting in them not being paid fairly most of the time. The act SOPA
(Security of Payments Act) was introduced just to facilitate such complicated processes so as

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to help workers and builders involved get what they deserve for the hard work they put in
(Cott, 2018).
Question 3:
A thorough study of the said act applicable to particular territory or state’s legislation to be
done and a copy of the same shall be obtained as the Act provides and sets a trail to the
procedure that needs to be followed to recover the due amount. Following conditions should
be met in order to use the aforementioned act:
a) The contract should adhere to the Security of Payment Act.
b) As per the contract, the work has already been completed and there are no mistakes
made.
As per the Act, the type of workers it protects and helps are the one’s those working in the
construction and building industry. The section 5 of the SOPA, 1999 clearly states what
construction work means in this act and which type of construction work it does not include
or protect. The definition of construction work is quite extensive. The construction works
which are not included in the Act are:
a) Extraction in any form whether surface or underground of for natural gas or oil of any
sort or minerals for that matter.
b) Any drilling or as such for the reason of underground construction be it boring or
tunnelling.
c) Or any change in future specified for the regulation of this subsection by the authorities
(NSW Legislation, 2019).
While, the Section 14 of the Act talks about the Payment schedule that is served by the
respondent, the one from whom the payment is being claimed, in return of the payment claim

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filed by the claimant. The payment schedule consists of two major aspects; first, the details of
the payment claim it relates with should be mentioned clearly; second, it should specify the
amount that the respondent wishes to pay or is willing to pay. Also, in case where the
respondent does not wish to pay the full amount claimant has claimed then, the respondent’s
reason for the partial payment shall also be specified (Australasian Legal Information
Institute, 2019).
After the adjudication process begins and the adjudicator has declared a particular amount
due, the court gets involved as per the act in order to accelerate the process of due amount
being paid. All claimant has to do is lodge an Adjudication Certificate with court along with
an affidavit of the amount due. Without any hearing or summons the court shall grant the
judgement (Watson and Watson Solicitors, 2019).
As per the market conditions, the contractors are more willing to take court action rather than
going ahead with a new set process because of the unawareness amongst them. In case where
the payment claim is missed, an amount specified in the claim by the claimant becomes due
despite the fact that it’s a correct amount or not. Now the claimant without the necessary
requirement of informing the respondent can file a claim to recover the claimed amount in the
court. In such scenario, the respondent has 28 days to defend and submit its defence to the
ongoing conduct of the lawsuit. The dispute can be claimed only if the arguments include
jurisdictional reasons, or the scenarios when payment claims get invalidated due to certain
conditions such as insolvency, invalid information, claimed amount being the one that is from
a separate contract, or even if the amount due is nowhere concerned with the construction
work but other services related in some manner. The claim cannot be disputed on the grounds
that the amount claimed is high or the work done by the worker was defective in any manner
nor a cross-claim can be filed because of the contract being breach on worker’s part (Nay,
2019).

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Question 4:
The act was amended various times in order to make it easier and convenient to work with.
As per the amendments made in 2010 the chance of recovery of the due amount increased as
the claimant could now ‘freeze’ the amount pending with the principle contractor and if the
principle contractor fails to do so, they shall be liable to pay the claimant the amount that was
due with the respondent. Amendments are not only being used to help the workers settle their
dues in an easy manner but are also helping in coerced settlement of baseless claims filed by
the fraudulent people (Brand, 2012).
The recent changes that have been and also some of them are about to be made public include
the ones that shall be declared in the year 2019. Few of the various major changes include:
a) The payment term shall be reduced from 30 business days to 20 business days (Confos,
et al., 2019).
b) Few significant increases in the penalties, as in are:
 If the head contractor due to any reason fails to submit the statement supporting the
payment claim as well as the supporting claim then the penalty usually charged on would
amount to penalty units of 200 or $22,000 u/s 17(3) (which remains the same in case of
individuals even after amendment) while as per the amendments, it changes to penalty
units of 1,000 or $ 110,000 (in case of corporations).
 In cases where head contractor with an intention to mislead serves fraudulent statement
supporting the payment claim, before amendment shall be charged with penalty points of
200 or $22,000 or imprisonment for 3 months or both u/s 13(8) (which stays the same
even after amendment in case of an individual); was changed to the penalty units of
1,000 or $ 110,000 (for corporations) (Henry, 2018).

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The key amendments made in the SOPA 2008 (NSW) that will be commencing from the
October 21st, 2019 also includes, the exemption of construction contracts that are owner
occupied from the act ( McCullough Robertson, 2019). It also states that only authorized
officers shall issue the penalty notices; and it also entails information regarding personal
liability of the directors and management for the particular offences committed by their own
companies or corporations and various other such amendments are being made just to
ensure the deserved ones receive justice (Westgarth, 2019).
Conclusion
The recent rapid changes in the SOPA has resulted in growing chance for justice being served
to the workers or the people involved in the building and construction industry. This act
works as a shortcut to get what the workers deserve and are either underpaid or not paid at all
for the efforts they put in their work. The amendments done in act serve as a shield for the
workers in the industry against unfair practices taken up by the corporations and
organizations in order to make profits. These revisions have not only helped the workers but
also the economy to grow as a whole.

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References
Building Industry Fairness (Security of Payment) Act 2017 Queensland, 2019. Queensland
Building Industry Fairness (Security of Payment) Act 2017. [Online]
Available at: https://www.legislation.qld.gov.au/view/pdf/inforce/current/act-2017-043
[Accessed 19 September 2019].
McCullough Robertson, 2019. New South Wales security of payment changes. [Online]
Available at: https://www.mccullough.com.au/2019/07/26/new-south-wales-security-of-
payment-changes/
[Accessed 20 September 2019].
Adjudicate Today, 2019. NSW Adjudication and Security of Payment Flowchart. [Online]
Available at: https://www.adjudicate.com.au/nsw/start/process-overview
[Accessed 20 September 2019].
Australasian Legal Information Institute, 2019. New South Wales Consolidated Acts. [Online]
Available at: http://classic.austlii.edu.au/au/legis/nsw/consol_act/bacisopa1999606/
s4.html#payment_schedule
[Accessed 20 September 2019].
Brand, M. a. D., 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.
Building & Construction Industry Security Of Payments Act: Powerful Legislation, 2019.
Security Of Payments Act NSW Flowchart. [Online]

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Available at: https://securityofpaymentsact.com.au/security-of-payments-act-new-south-
wales/security-of-payments-act-nsw-flowchart/
[Accessed 20 September 2019].
Building & Construction Industry Security Of Payments Act, 2019. Building & Construction
Industry Security Of Payments Act. [Online]
Available at: https://securityofpaymentsact.com.au/
[Accessed 19 September 2019].
Confos, E., Oldmeadow , . H. O. & Kalliris, J., 2019. Update: Security of Payment
Amendments in NSW receive Royal Assent. [Online]
Available at: https://www.nortonrosefulbright.com/en/knowledge/publications/94b3d9d3/
update-security-of-payment-amendments-in-nsw-receive-royal-assent
[Accessed 20 September 2019].
Contracts Specialist, 2019. Rampant payment disputes in the building and construction
industry was the main reason for the enactment of the Security of Payment Act in Australia.
[Online]
Available at: https://www.contractsspecialist.com.au/security-of-payment-sydney/
[Accessed 20 September 2019].
Cott, P., 2018. Sourceable. [Online]
Available at: https://sourceable.net/the-security-of-payment-act-and-its-important-
consequences/
[Accessed 20 September 2019].
Henry, G., 2018. 2019 Changes to NSW Security of Payment Act (SOPA). [Online]
Available at: https://turtons.com/blog/2019-nsw-security-of-payment-act-changes-sopa
[Accessed 20 September 2019].

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Lawpath, 2016. What is the Security of Payments Act (NSW). [Online]
Available at: https://lawpath.com.au/blog/what-is-the-security-of-payments-act-nsw
[Accessed 20 September 2019].
Macindoe, R., 2015. A Seven-Step Guide to using the Security of Payment Act. [Online]
Available at: https://aca.org.au/article/using-the-security-of-payment-act-a-seven-step-guide
Masson, B., 2018. Turtons. [Online]
Available at: https://www.turtons.com/blog/how-to-how-to-make-a-payment-claim-under-
security-of-payment-in-ns8
[Accessed 20 September 2019].
Nay, R., 2019. LeagalVision. [Online]
Available at: https://legalvision.com.au/principal-payment-claim-nsw/
[Accessed 20 September 2019].
NSW Government, 2019. Security of payment. [Online]
Available at: https://www.fairtrading.nsw.gov.au/trades-and-businesses/construction-and-
trade-essentials/security-of-payment
[Accessed 20 September 2019].
NSW Legislation, 2019. Building and Construction Industry Security of Payment Act 1999
No 46 - Section 14. [Online]
Available at: https://www.legislation.nsw.gov.au/#/view/act/1999/46/part3/div1/sec14
[Accessed 18 September 2019].
NSW Legislation, 2019. Building and Construction Industry Security of Payment Act 1999
No 46 - Section 5. [Online]
Available at: https://www.legislation.nsw.gov.au/#/view/act/1999/46/part1/sec5
[Accessed 18 September 2019].

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Turtons, 2019. Security Of Payment In NSW: A Practical Guide. [Online]
Available at: https://www.turtons.com/security-of-payment-act-nsw-everything-you-need-to-
know
Watson and Watson Solicitors, 2019. Watson and Watson Solicitors. [Online]
Available at: http://www.watsonandwatson.com.au/service-15/security-of-payment-act
[Accessed 20 September 2019].
Westgarth, C. C., 2019. Amendments to the NSW security of payment regime: what you need
to know. [Online]
Available at: https://www.lexology.com/library/detail.aspx?g=de04f257-2e4e-484d-8d6d-
5178fe54d428
[Accessed 20 September 2019].