BUILDING & CONSTRUCTION
At CBD Law, we have experience with the key pieces of legislation that govern the rights and responsibilities of contractors and subcontractors within the building and construction industries. Read more below, or set up a time to speak with one of our solicitors.
The Building and Construction Industry Security of Payment Act 1999 (The Act) is a key piece of legislature for sub-contractors working on behalf of head contractors. The Act allows for a quick resolution of disputes over payment, where traditionally head contractors have been in a position to stall payment through lengthy and expensive litigation. The Act also enforces the timely payment of invoices where an objection in the appropriate form has not been lodged by the head contractor.
The Contractors Debt Act further allows for payment to be obtained directly from a principle where a judgement against the head contractor has been obtained and the principle still owes the head contractor money.
Below is some information that will help you understand the two Acts and how they might apply to you.
Building and Construction Industry Security of Payment Act 1999 (The Act)
The Act applies to most building and construction contracts. A construction contract is an agreement to carry out construction work or supply related goods and services (such as engineering, architectural advice, interior decoration work or the supply of building materials) and can be written or verbal. Certain contracts are excluded, most notably contracts for residential buildings, which are covered under the Home Building Act 1989.
Procedures for securing payment
Once a progress or payment claim (invoice) has been served to the person liable to make payment, the person receiving the claim has certain choices. The progress claim must:
- Identify the work
- Indicate the amount of the progress payment due
- State that the claim is made under the Act
Once the payment claim has been made, the person receiving has the choice to either pay the amount claimed in full, or dispute all or part of the claim.
Any dispute (in the form of a payment schedule) must be sent by the respondent either within the time stipulated in the Contract, or within ten business days from when the payment claim is served.
Consequences of not paying in full or issuing a payment schedule
If the liable party does not pay in full or issue a payment schedule, then the contractor may:
- Sue for the amount unpaid as debt due
- Serve a notice on the respondent advising of his/her intention to suspend the carrying out of construction work (suspension can take place within two (2) business days of giving notice)
Once a payment claim has been served, options are open to either pursue the debt in court as a debt due or alternatively seek to have the matter determined by an adjudicator (appointed through the Institute of Arbitrators).
The adjudication process is not a final determinant for the validity of the dispute claim, but it fixes an amount the respondent must pay as security for the amount claimed. The time limits are strict and any breach of the time limits will adversely affect the process. The time limits vary but can be summarised as follows:
- The respondent issues the payment schedule (usually 10 business days after the payment claim is served).
- Either within 5 business days after the payment schedule is sent by the respondent or within 10 days from the due date for payment (if no payment schedule is served), the claimant applies for adjudication.
- Within 5 business days of receiving a copy of the application or two days after receiving notice of the adjudicator’s acceptance of the application, the response to adjudication application must be made.
The adjudicator is obliged to determine the status of the application within 10 business days after acceptance of the application or within a timeframe agreed by all parties.
Respondent’s obligations following adjudicator’s determination
Once determination has been made, the respondent must either pay the amount to the claimant or give acceptable security for payment of that money.
What if no response is made to the claim for payment?
If the respondent does not respond to the claim for payment within the prescribed period, you can either elect to have an adjudication certificate issued by an adjudicator or alternatively proceed to Court. The difficulty is determining whether or not to file an adjudication application (given that this must be done within 10 days of payment falling due). Once the 10-day period has elapsed, you will need to either re-issue the progress claim at a later date or alternatively utilise the Court avenues for debt recovery.
Whilst some Courts have previously applied security of payment legislation strictly if a progress schedule has not been issued, and have entered judgement quickly, it remains to be seen as to whether all Courts will allow judgement to be entered on the basis of a claim being made and no response received within the statutory period. Whilst the Supreme Court has taken this approach on occasion (preventing a defendant from raising a defence/cross-claim where a payment schedule has not previously been issued) we are not confident that all Courts will follow their lead, which may lead to further difficulties and delays for you, the claimant.
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Contractors Debts Act 1997
Under this Act, a sub-contractor can seek payment from a principle in cases where the head contractor is refusing or unable to pay what is due.
In the first stage, proceedings must be issued against the defaulting head contractor. If the head contractor then fails to lodge a defence, a ‘Debt Certificate’ may be issued, under which a subcontractor is entitled to payment directly from the principle.
If a defence is lodged by the head contractor, an application can then be made to the Court to prevent the principle from paying the disputed amount to the head contractor until Court proceedings have been finalised.