Covering Letter

To,

The Head/Administration,

Property Council of New South Wales 

Sub: Report on Building and Construction Industry Security of Payments act 1999 (as amended) 

Respected Sir/Ma’am,

As a report on the subjective act has been asked by you, this is to state that the same is prepared and attached hereunder as Annexure A. All the aspects asked by you are covered under the said report and this is to hope that the presented report would fulfil the purpose. You are requested to review the report.

Your Sincerely.

The report provided hereunder is focused on the Building and Construction Industry Security of Payment Act 1999 No 46 (hereinafter referred as an act). The act is applicable to New South Wales State of Australia and is much significant in the area of construction contracts (Minter Ellison, 2018). At the very first instance, the report will cover the manner in which the titled act work and further the objectives of the same will be discussed. Apart from the manner and objective, the report will further focus on the roles of courts in the application of the act. Lastly, the recent amendments that have been introduced to the act by the houses of parliament will be reviewed.

The act has been developed with the very clear objective that is to ensure the timely payments of the parties to a construction contract. 38 Sections in total are there in the act (Bailey, 2014). Section 5 of the act says that construction work is a wider term that also includes an extension, restoration, and repair. According to section 7 of the act, the act is applicable to every construction contract including the verbal ones. Mainly three parties are there in a construction contract and that are the owner, principal contractor, and sub-contractor. According to the provisions of this act, every person who provides any goods or services to a construction contract is eligible to receive the timely payment of his/her efforts. Now the issue is to check that what is the time in which the payment must be credited to the accounts of such people. The act described such time limits. This is not wrong to state that the act is a complete guide in the area of providing justices to the victim parties in the area of the construction contract. The act works in a very clear way. The same puts an obligation on the owners/head contractors to for making the payment to head contractor/subcontractor.

How does this Act work?

Further, in case of non-payments, the act provides the penalties for the guilty parties. In addition to this, the same also states the other options that an innocent party can use to get his/her payment. This is to mention that the act provides right to the innocent parties. It means the same prescribes the rights in addition to the manner in which the same can be used by the innocent parties. Part 2 of the act provides the rights related to progress payments and on the other side, Part 3 of the act provides the procedure to recover such progress payments.

Division 2 of the act focused on the adjudication of disputes and provides a complete procedure, by following the same one can receive the payment. The manner in which this act works is far easy to understand as the same includes every possible aspect a payment claim. Section 14 of the act provides that the parties are entitled to receive the payment schedule from the liable person and section 15 provides the penalties in case of failure to provides such a schedule.

After the introduction of this act, no confusion is left there among the parties in relation to their rights and liabilities as the act is a complete bunch of the information and now the innocent parties need not to be dependent on any lawyers or any other external assistance.

Before any other legislation, this act is also developed because of few necessities and requirements. In order to mention the objectives of this act, the situation prior to this act is also necessary to be reviewed. Before the development of this act, neither the head contractor nor the sub-contractors in a construction work were informed about their rights. Further, no authority was there to address the issues related to a construction contract only (Royce, 2016). The regular courts were hearing the cases related to construction contract and therefore the proper justice was either absent or too much delayed. The sole objective of the company was to ensure that people who devote their money, efforts and time to a construction work, receive their consideration on time and in full.

Section 3 of the act is one of the significant sections to study that describes the objectives of the act. Subsection 1 of the act states that the lead objective of the act is to ensure that every person who carries out any construction work is entitled to receive and recover the progress payments in respect to the work carried out by him/her or the good/services provided by him/her.

Why was it introduced?

Section 3(2) of the act says that the act provides rights and remedies to the entitled parties regardless of their contractual terms and conditions. It means if no rights are mentioned in the contract then also parties can receive the payment and can make the others liable to submit payment schedule. The act does not limit the contractual rights of parties and the remedies granted under this act are additional to the same (Ross, 2013). Moreover, the act provides a well define a procedure that a party to the construction contract can use in order to receive the due payments.

There are many benefits of the introduction of this act. One of the main benefits that have been seen and reviewed after the enactment of this act is smoothing the processing of recovery of due debts. Before the development of this act, the process was used to get delayed in the absence of a comprehensive act. This was the reason that the act has been introduced. All the focus of the act is on to ensure the payment of due debts to the entitled parties.

The other motive behind the introduction of the act was to reduce the burden of courts because the same also had other cases. It was not possible for the courts too to entertain the cases related to dispute of due payments under a construction contract only and the innocent parties were also forced to face lengthy proceedings of the courts. Now the objective of the court is to provide justice to the parties fastly.

The roles of the regular courts are mentioned under Division 2 of the act. The division is titled as an adjudication of disputes and includes the sections from 17 to 26 of the act. Before looking after the working of the act in relation to the regular court actions, the study of section 13 is required. The section says that a person who is entitled to receive a progress payment under section 8 (1) of the act can serve the payment claim to the other party who is liable to make the payment. Now the role of the courts comes into light when the person liable to make the payment does not pay the same. Section 15 states that in such a situation the eligible person to receive the payment can recover the unpaid portion of the amount as a due debt in any court of related (competent) jurisdiction (New South Wales Government, 2018). The act supports the courts as the same provides many rights to the innocent parties and courts do not need to decide anything at their end. They only need to refer the provisions of the act and to ensure the enforcement of the same.

How does the act work in relation to the regular court actions?

This can be mention that both the act and courts are helpful for each other and are incomplete without the existence of each other. Where on one side, the act provides all the rights and remedies for the court, the other side, the court ensure the enforcement of such remedies. However this is correct that the act is a complete guide in itself, this is to be agreed that the parties of the construction contracts are still depended on the courts for the justice.

Section 17 of the act says that if a liable person fails to make the payment of a due debt or the provided payment schedule reflect different amount than the payment claim submitted by the claimant then in such a situation the claimant can apply to any court of competent jurisdiction for the adjudication of his/her payment claim. 

Section 18 of this act defines the eligibility criteria for the adjudicators.  Section 19 states that an adjudicator application can be accepted by the adjudicator if the authorized nominating authority refers the same. Such acceptance needs to be served to claimant and respondent. Section 20 of the act prescribed the process by following which a respondent in a case can respond the adjudication application lodges by the claimant. All these sections are relatively significant as they prescribe the manner in which the act works in relation to court actions. Section 23 and 24 are also important as section 23 puts a liability on owner/head contractor to pay the adjudicated amount and section 24 states the consequences of not doing so. By reviewing these sections this can be stated that the courts play their vital role in the process of providing justice to the victim parties to the contract (Legalvision, 2016).

Amendments are the changes that authority/government introduces to the acts in order to meet the requirements of changing the environment. In the studies act too, many of the amendments have been made. Recently the amendments have been introduced in the act in the year 2013. Under this amendment, many of the rights have granted to sub-contractors. Section 11 of the act prescribes the time period in which a progress payment becomes due for sub-contractors as well as head contractors (cosoff cudmore knox, 2014).

Retention money is just another concept that provides an additional right to the sub-contractors. The provisions relate retention money is mentioned in the section 26A of the act. According to the provisions of this section, a claimant can request the principal contractor to retain the money related to payment claim out if the money owed to the respondent by the principal contractor. Subsection 5 of the section states that the person who receives such payment withholding request must inform the claimant within 10 business days if the same no longer remains the principal contractor for the claim (Austlii, 2018).

Section 26B says that if a claimant makes any payment withholding request under section 26A then it will become the liability of principal contractor to keep the money retained for the claimant out of the money owed to respondent. Section 27 of the act is a section that provides the right to a subcontractor to cancel the contract in case of non-payment of due debts.

The amendments in section 13 say that the head contractor will be liable to provide a statement to the principal stating that he/she made all the payments to the sub-contractors if he/she serve a payment claim to the principal (William Roberts Lawyers, 2018).

In a construction contract, a sub-contractor works under the head contractor and a head contractor works under the owner. In those cases where the head contractor does not appoint any other person under him/her, then the head contractor becomes the sub-contractor. It means the rights of a sub-contractor are transferred to the contractor and such contractor can ask the payment schedule and progress payment similar to a sub-contractor. The amendments have provided many other privileges to the sub-contractors, out of those the lead ones have mentioned in the above discussion.

Conclusion

The provisions of the act are easy to understand and are mainly focused on the payment claims. The act provides remedies to the victim parties in against of liable parties. In the aforesaid report, the important aspects related to the acts have been covered including the role of courts and recent amendments of the act. To conclude this report, this can be stated that the act is far significant and the person who enters into a construction contract within the jurisdiction of NSW state must be aware of the provisions of this act.

References 

Austlii. (2018) Building And Construction Industry Security Of Payment Act 1999 – Sect 26a [online] Available from: https://www5.austlii.edu.au/au/legis/nsw/consol_act/bacisopa1999606/s26a.html [Accessed on 09/10/18]

Bailey, J. (2014) Construction Law. Hoboken : Taylor and Francis.

Building and Construction Industry Security of Payment Act 1999 No 46

cosoff cudmore knox. (2014) Building & Construction Industry Security of Payment changes in NSW and  QLD. [online] Available from: https://www.ccklawyers.com/journal/2014/5/6/building-construction-industry-security-of-payment-changes-i.html

cosoff cudmore knox. (2014) Building & Construction Industry Security of Payment changes in NSW and  QLD. [online] Available from: https://www.ccklawyers.com/journal/2014/5/6/building-construction-industry-security-of-payment-changes-i.html [Accessed on 09/10/18]

Darryl Royce,  Adjudication in Construction Law (Informa Law from Routledge, 2016).

Legalvision. (2016) 9FAQs About the Building and Construction Industry Security Of Payment Legislation. [online] Available from: https://legalvision.com.au/a-brief-guide-to-the-building-and-construction-industry-security-of-payment-legislation/ [Accessed on 05/09/18]

Minter Ellison.  (2018) Security Of Payment Legislation New South Wales [online] Available from: https://www.constructionlawmadeeasy.com/SecurityofPaymentNSW [Accessed on 09/10/18]

New South Wales Government. (2018) Building and Construction Industry Security of Payment Act 1999 No 46 (2013) [Online] Available from:  https://www.legislation.nsw.gov.au/#/view/act/1999/46/full c

NSW Government. (2018) Security of Payment Reforms. [Online] Available from: https://www.fairtrading.nsw.gov.au/about-fair-trading/have-your-say/security-of-payment-reforms [Accessed on 09/10/18]

Stuart Ross, (2013) Security of payment legislation in Australia: issues with adjudication decisions.  The Journal of New Business Ideas & Trends. 11(1), pp. 47-53.

William Roberts Lawyers. (2018) Recent amendments to the Building and Construction Security of Payment Act 1999 (NSW. [online] Available from: https://www.williamroberts.com.au/News-and-Resources/News/Articles/Recent-amendments-to-the-Building-and-Construction-Security-of-Payment-Act-1999-NSW- [Accessed on 09/10/18]