The Building and Construction Industry Security of Payment Act 1999 (NSW) (“Act”) can be a powerful tool for subcontractors to use when seeking payment for work performed and materials supplied from non-paying or late paying builders.
When work has been performed or materials supplied entitling a subcontractor to make a claim for a progress payment under a subcontract, the subcontractor can serve a “payment claim” (a complying invoice) on the builder. Under the Act, the builder then has 10 business days to issue a “payment schedule” to the subcontractor setting out the amount of the payment claim it intends to pay. The builder has to set out also the items it does not propose to pay and its reasons for non-payment. The items in dispute can then be referred for adjudication.
If the builder fails to issue a payment schedule in time it becomes liable to the subcontractor for the full amount of the payment claim. That is the case even if the builder has contacted the subcontractor by telephone or email to raise issues about the work or materials within that period. If the subcontractor is not then paid the amount of the payment claim, he or she can sue the builder for the amount as a debt due to the subcontractor.
Significantly, the Act prevents the builder from cross claiming against the subcontractor in those proceedings or putting up a defence about matters arising under the subcontract. The builder’s hands are tied. It will likely have to pay up the subcontractor in full plus any interest and legal costs, and then sue the subcontractor separately for any counter claim. That is expensive and time consuming and a distraction from the builder’s business.
Of course, a subcontractor has to think very carefully before taking such steps because of the risk of causing long term damage to the relationship with the builder.
For subcontractors, clearly itemised invoices that inform builders that there are payment claims under the Act are important. For builders, efficient contract management processes are vital.
At Everingham Solomons, we have the knowledge and experience to advise builders and subcontractors on these and other aspects of the Act because Helping You is Our Business.
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