By Dr Samer Skaik
In the construction industry, ensuring timely and fair payment for work done is crucial for the smooth functioning of projects. Understanding the statutory right to progress payment and the adjudication mechanism outlined in the Building and Construction Industry Security of Payment Act 1999 (NSW) is essential for construction professionals to effectively manage security of payment claims. Here’s a practical guide on understanding how to approach security of payment claims:
Understanding the Statutory Right to Progress Payment
- Reference Date: A construction contract determines the date on which a claim for a progress payment may be made, known as the ‘reference date.’ If the contract is silent about the reference date, it defaults to the last day of the named month in which the construction work commenced and the last day of subsequent named months.
- Claims and Payments: A claimant is entitled to a progress payment on and from each reference date and can only make one claim for each reference date. However, any unpaid amount from a previous claim can be included in the next claim.
Initiating the Statutory Adjudication Mechanism
- Serving a Payment Claim: The process begins with the claimant serving a valid payment claim on the respondent within the period determined by the contract terms or within 12 months after the last construction work related to the claim was carried out.
- Responding with a Payment Schedule: Upon receiving the payment claim, the respondent must provide a payment schedule within 10 business days or as specified in the contract, indicating the proposed payment amount and reasons for any withholding.
Consequences and Options for Non-Payment
- Consequences of Non-Payment: If the respondent fails to provide a payment schedule and does not pay the claimed amount by the due date, the claimant has options to recover the unpaid amount through legal action, initiate adjudication proceedings, or serve notice of intention to suspend work.
- Adjudication vs. Legal Action: Opting for adjudication allows the claimant to avoid the complexities of pursuing a statutory debt through legal proceedings. This process will be covered in a separate post.
Legal Proceedings and Defense Grounds
- Commencing Legal Proceedings: If the claimant decides to recover the unpaid amount through legal action, the court will consider the relevant circumstances before issuing a judgment in favor of the claimant.
- Limited Grounds for Defense: The respondent has limited grounds to contest liability in legal proceedings, primarily related to the validity of the payment claim.
Conclusion
Understanding the statutory right to progress payment, the adjudication process, and the consequences of non-payment is vital for construction professionals to effectively manage security of payment claims. By navigating these procedures with clarity and compliance, construction stakeholders can ensure fair and timely payments, fostering trust and efficiency within the industry.
This comprehensive understanding of the statutory claim mechanism and the legal proceedings involved is crucial for construction professionals to navigate security of payment claims effectively and ensure fair and timely payments for work done. It fosters trust and efficiency within the industry, ultimately contributing to the successful completion of construction projects.