Building and construction industry Payment security legislation

Who can make a complaint?

Strict procedures must be followed for a contractor or builder to recover unpaid amounts or defend a claim. The information below provides an overview of new SOP laws in the ACT and how they may potentially affect HIA members.

What can I claim?

You have the right to claim:

  • construction work you have done
  • building materials or facilities you have provided or hired
  • consulting services you have provided
  • interest on overdue installments
  • your losses and additional expenses due to the removal of work from your contract while you have legally suspended work under these laws
  • cash collateral and holdbacks
  • at the end of a contract, a claim under the Act can be made for final payment.

These laws allow you to make a progressive claim and receive a progressive payment. There is an implied right to make escalating claims where a contract does not provide adequate provisions. If you make a claim, you may seek payment of any unpaid amounts by auction.

What is the auction?

This is a process put in place under these laws where an independent arbitrator will decide the amount to be paid. Arbitration is a quick way to get a decision and is an alternative to going to court. A referee’s decision may be enforced as a judgment.

What is the first step?

When you have the right to make a progressive claim, you present a request for payment to your client/principal (the respondent). Your complaint must:

  • be done at the time specified in your contract or, if no time is specified, at the end of the month
  • be written and addressed to the respondent
  • describe the construction work, related goods or related services for which you are applying
  • indicate the amount you are claiming is due
  • include the words:
    “This is a claim for payment under the Building and Construction Industry (Payment Security) Act 2009 (ACT)”.

To make a claim you must:

  • establish the reference date for making a claim
  • decide the amount to which you are entitled, calculated on the reference date
  • on or after each record date, make a written demand for payment and serve it on the defendant (this will usually take the form of a tax invoice)
  • serve the claim by delivering, mailing or faxing it to the defendant (or via another form of service as specified in the contract)
  • record the date of service, which is the date the respondent receives the claim.

What happens next?

After you deliver your claim to the defendant, ONE of three things can happen:

  1. The defendant pays you the exact amount you claimed
  2. The sponsor gives you a payment schedule

Within 10 business days of receiving your claim, the respondent can give you a written statement of the amount they are willing to pay, with reasons for not paying the difference. This is called a “payment schedule” and the amount the respondent is willing to pay is called the “expected amount”.

If you receive a payment schedule, you can:

  • accept the expected amount that the Respondent has agreed to pay in their payment schedule, and
  • collect the unpaid part of the amount claimed from the defendant as a debt owing to the plaintiff in any court of competent jurisdiction, or
  • apply in writing to an Authorized Nominating Authority (ANA) for a decision. The request must be made within 10 business days of receipt of the payment schedule.

The respondent is limited, in any decision, to raising a defense not provided for in the payment schedule.

If the respondent gives you a payment schedule showing the amount they are willing to pay, they must pay that amount by the due date to which the payment relates. If not, you can:

  1. suspend the work by giving notice to the defendant (this notice must state that it is made under the ‘Law on the security of payments in the building and construction industry’)
  2. take legal action in court to recover the full amount you claimed as debt or go to court (see below).

Also, if the respondent fails to pay you the agreed amount (as above), they will not be permitted to bring a counterclaim against you or raise a defense in any legal proceedings you bring against them. (However, this restriction will not apply to arbitration.)

  1. Respondent fails to pay in full or gives no payment schedule

If the defendant does not pay the full payment claim or give you a payment schedule within 10 business days after you give them your written demand, you may suspend work after giving the defendant notice. and you may keep any plants and loose materials you have provided to the respondent.

You will also be able to take legal action to recover the full amount claimed by you as a debt or go to court (see below).

If the respondent doesn’t pay the full amount or give you a payment schedule, they won’t be allowed to bring a counterclaim against you or raise a defense to any lawsuits you bring against them. (However, this restriction will not apply to arbitration.)

Where there is no payment schedule, before a claim for arbitration is made here, you must give the respondent written notice that you intend to seek arbitration of the claim payment and has five business days to provide you with a payment schedule. . If after notice is given to the respondent, you have not received a payment schedule from the respondent within five business days, then you may request arbitration.

To note: Keep all written notices

Proof of all written notices sent and received must be retained. This may include confirmation reports, registered mail receipts, etc., as well as the original notices sent to the Respondent.

What happens if the respondent does not pay the amount judged?

You can ask the organization that appointed the adjudicator to give you a certificate of adjudication. This certificate may be filed with the competent court as a judgment. You must support the certificate with an affidavit stating that the arbitrated amount is still unpaid.