To all those in the Construction and the Building industry -

Understanding the Building and Construction Industry Security of Payment Act 1999 (NSW)(“SoPA”)

 Adjudication v The Supreme Court

 

Traditionally, construction disputes are among some of the most expensive lawsuits involving heavy proceedings at the Supreme Court. The Building and Construction Industry Security of Payment Act 1999 (NSW)(“SoPA”) has bought this to an end.

 

The SoPA was implemented to ensure that those who carry out construction works or who supply related goods and services are entitled to receive and recover payments.

 

To those of you working in the building and construction industry, you anticipate and deserve prompt payment for your hard work. However, as most of you invoice at the completion of the works, situations may arise where you may not get paid or be paid on time, leaving you to shoulder the financial burden.

 

What is the Security of Payment Act (‘SoPA’)?

The SoPA was introduced in 1999 and has since undergone several amendments to enhance its efficacy. In 2021, its scope of application expanded to include residential home building contracts. If you are homeowner, you can be taken to adjudication under the SoPA.

 

The SoPA aims to ensure that those who carry out construction work, including residential home buildings, or supply related goods and services, are paid promptly and in full. It simplifies and expedites the process of recovering payments and provides an alternative to court proceedings.

 

The intention of the SoPA is to keep cash flowing in the construction industry and prevent insolvency.

 

Your rights under SoPA

The SoPA grants builders and contractors who are owed money specific rights, including:

  • The right to receive progress payments for construction work or the supply of goods and services.

  • The right to issue a Payment Claim to the debtor, identifying the construction work or goods and services, the claimed amount, and a statement that it is made under the SoPA.

  • The right to apply for adjudication if a Payment Claim is disputed or ignored by the debtor.

  • The right to suspend work under certain conditions if a payment is overdue.

 

The SoPA also obliges debtors to respond to a Payment Claim with a Payment Schedule if they dispute the claim or disagree with the full amount of the claim.

 

How do you recover a debt under SoPA

 

1. Serve a Payment Claim

As soon as your right to a progress payment arises, you can serve a Payment Claim on the debtor. It must be served within 12 months of when the construction work was last carried out or the related goods and services were last supplied.

 

The Payment Claim MUST identify the construction works or goods and services to which it relates, state the claimed amount, and indicate that it is made under the SoPA.

 

2. Await a Payment Schedule or Payment

Once the Payment Claim is served, the debtor has 10 business days to either pay the full amount claimed or respond with a Payment Schedule.

The Payment Schedule must indicate the amount the debtor proposes to pay and, if less than the amount claimed, a reason needs to be provided.

 

3. Apply for Adjudication

If the debt remains outstanding, the next step is to apply for adjudication with an adjudication body.

Adjudication is a speedy dispute resolution process where an independent adjudicator (normally an industry expert) is appointed to resolve the dispute.

 

The process is designed to be straightforward and allows the claimant to seek a determination in a relatively short timeframe, generally within 2 to 4 weeks.

 

4. Obtain an Adjudication Certificate

If the adjudicator rules in your favour, you can request an adjudication certificate and file it as a judgment debt with the appropriate court.

 

5. Enforce the Adjudication Decision

Adjudication orders may be enforced as an order of the court once it is registered.

The court has the power to order various enforcement actions, such as garnishment, property liens, or seizure and sale of assets, etc.

 

If you are in the building and construction industry and that you are owed a debt and would like to recover your debt through the SoPA, or if you have been served with Payment Claim under the SoPA, please contact one of our team members to see how we can assist you.

 

Our office can assist with:

  • Drafting and reviewing contracts to ensure compliance with the SoPA.

  • Preparing or responding to Payment Claims and Payment Schedules.

  • Preparing or responding to Adjudication Applications.

  • Enforcing adjudication decisions.

*Note that the above contents are not intended to be legal advice, please contact our office direct for legal advice.

 

Author:

Ms. Macy Yao, Solicitor

Ms. Anica Zhang, Principal

 

02 August 2023