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Recovery of Debts in the NSW Building Industry

in Business Law by Vicky Antzoulatos on

Are you a sole trader, or a small or large business in the building industry looking to be paid or recover a debt?

The Building and Construction Industry Security of Payment Act 1999 provides a process for the receipt and recovery of progress payments by a person who carries out construction work or supplies related goods or services under a construction contract.

Importantly, the Act does not apply to residential building work.

Payment Claim

Under the Act, a person seeking to be paid under a construction contract may serve a Payment Claim on the person who is liable to pay the debt.

The Payment Claim must:

  1. Identify the construction work or related goods or services;
  2. Indicate the amount of the progress payment that the claimant claims to be due;
  3. State that it is a Payment Claim made under the Act;
  4. Be served within 12 months after the construction work was last carried out or the period stated in the construction contract.

Payment Schedule

If a person who is served with a Payment Claim under the Act wishes to dispute that they are liable to make the progress payment set out in the Payment Claim, they must serve a Payment Schedule which:

  1. Identifies the Payment Claim to which it relates;
  2. Indicates the amount of the payment which the person proposes to make, including a zero payment if applicable; and
  3. Is served with 10 business days after the Payment Claim is served or within the times provided by the construction contract, whichever is the earlier.

If a Payment Schedule is not served within time, the person becomes liable to pay the claimed amount on the date that the progress payment is due. Further, the claimed amount can be enforced as a debt in Court and the claimant can give notice of its intention to suspend construction work or related goods or services.

Adjudication

A claimant who is served with a Payment Schedule for an amount less than the amount claimed can apply for adjudication, provided it has given appropriate notice of the adjudication application to the person from which it is claiming.

An adjudicator’s determination is usually difficult to overturn or challenge.

If a person fails to pay any part of any amount determined by the adjudicator, that amount may be enforced as a debt in Court, and construction works or the supply of related goods of services can again be suspended.

Contractors Debts Act 1997

The Contractors Debts Act 1997 provides a mechanism whereby a person who is owed money for work carried out or materials supplied can by pass a defaulting contractor and obtain payment directly from the principal who engaged the defaulting contractor.  This includes monies determined to be owed by an adjudicator’s determination under the Building and Construction Industry Security of Payment Act. A debt certificate must have been obtained and a notice of claim on the principal must have been served before seeking to enforce the debt.

Conclusion

Whilst both the Building and Construction Industry Security of Payment Act 1999 and the Contractors Debts Act 1997 provide a mechanism for the recovery of payments by building contractors ensuring cashflow to the industry, it is crucial that the process set out by both of the Acts is strictly followed otherwise a person may lose their ability to claim.

If you require assistance to recover a debt or you have been served with a Payment Schedule for which you need advice, please contact Vicky Antzoulatos, Practice Group Leader on (02) 8267 0619.

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