22 December 2021
The Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) provides a mechanism for making claims for payment and quickly determining disputes about payment, on an interim basis, by adjudication. Disputes can be determined through to payment in as little as 45 days.
With the object of keeping payments flowing in the construction industry, the framework of the Act requires various steps to be taken in the payment claim and adjudication processes within five or 10 business days. Those time periods are not extendable.
In the early years of the Act, claimants were known to ambush respondents with payment claims at Christmas, hoping they would be overlooked during the holiday break and become payable as a debt, regardless of merit.
Since then, the Act has been amended to provide for a brief but welcome moratorium period over the Christmas and New Year holiday, where the days between are excluded from the definition of business days under the Act.
However, other than those excluded days, the timeframes for responding to payment claims and adjudication applications under the Act are tight and unforgiving.
Principals and head contractors should be aware of the limited reprieve and ensure they are not caught by dates for service of payment schedules and lodgement of adjudication responses falling due over the longer summer shutdown.
The Act carves out 27, 28, 29, 30 and 31 December from the definition of a business day. Simply put, business days under the Act cease on 24 December 2021 and (this season) resume the day after the New Year’s Day public holiday, which happens to be 4 January 2022. Therefore, the days in between, including 25 December 2021 and 3 January 2022, will not be counted in calculating the time for serving payment schedules or lodging adjudication applications and responses.
However, principals and head contractors should not assume that because 25 December 2021 to 3 January 2022 are not counted as business days, they will not receive a payment claim within that period. Payment claims may be served on and from the last day (calendar day) of the named month in which construction work was carried out. In the case of a final payment claim or if the contract is terminated, a single payment claim may be served at any time within 12 months after construction work was last carried out.
As well, residential owner occupiers will now need to be alert to any payment claims received from their builders, thanks to the amendments to the Act which came into effect earlier this year.
In finalising their accounts for the year, some subcontractors and suppliers may prepare and serve payment claims at the end of December 2021, although the majority of the industry is on holiday.
Be sure to check if the request for payment includes the words “This is a payment claim that is made under the Building and Construction Industry Security of Payment Act 1999 (NSW)”. To engage the machinery of the Act, a payment claim must state that it is made under the Act.
The Act’s exclusion of the days between Christmas and New Year’s Day public holiday doesn’t mean those days are excluded in terms of the payment mechanism under the relevant contract.
Before signing off for the holidays, check whether your contract excludes those days from the timeframes in which certificates, assessments or other responses are required.
Principals and head contractors need to remain vigilant during the Christmas to New Year period and check all points of receipt, which may include:
If a payment claim or adjudication application is served during (or immediately before) the Christmas to New Year break, the extra time provided by the moratorium does afford the recipient with an opportunity, which only happens once a year, to put extra time into the preparation of the response. A silver lining, but cancel Christmas!
The Act provides that if the recipient of a payment claim fails to issue a payment schedule within 10 business days after receiving a payment claim, the respondent will be liable for the entire amount claimed as a debt.
If a principal or head contractor fails to issue a payment schedule within time and becomes liable for the entire amount claimed, the claimant may enforce that amount in court proceedings and the principal or head contractor cannot bring any cross-claim against the claimant, or raise any defence in relation to matters arising under the contract.
Monitoring addresses and being across the relevant dates will help avoid a nasty surprise on your return from the summer shutdown in 2022.
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.