The Building and Construction Industry Security of Payment Act is intended to fast-track the resolution of disputes on building sites. As such, it forces those involved to comply with a ruthless timetable, and the consequence of non-compliance can be drastic.

1. Payment Claim

When a builder or contractor wants to get paid for building work, they issue a payment claim. This is simply an invoice that should meet at least three criteria:

  1. It must identify the construction work which is being claimed for in the invoice;
  2. It must indicate the amount that is claimed;
  3. It must be accompanied by a ‘supporting statement’, in the form prescribed by the regulations, in which the claimant declares that all subcontactors have been paid the amounts owed to them.

In some instances, it is also mandatory that the claim includes a statement to the effect of “this is a payment claim made under the Building and Construction Industry Security of Payment Act”. We recommend you include this in all instances- even if it is not mandatory it doesn’t hurt and puts the matter out of issue.

2. Payment Schedule

Once the payment claim is served, the principal has 10 business days, or the period of time prescribed in the construction contract (whichever is lesser) to put on a Payment Schedule. The Payment Schedule must meet three criteria:

    1. It must identify the payment claim to which it responds;
    2. It must indicate the amount of payment (if any) that the principal proposes to make; and
    3. To the extent that there is a difference between the claimed sum and the proposed sum, must explain what the reason for that difference is.

3a. Payment Schedule Not Served

If a valid payment schedule is not served within the timeframe above, the claimed amount is deemed due and payable. The builder is then entitled to enforce that claim as a debt. They can seek to do so via two options:

    1. They can seek an adjudication determination (which is a very quick and cheap way to get a binding decision).
      • In that determination, the adjudicator is not allowed to take into account any submissions from the principal (this is the consequence of the principal missing the deadline in 2 above). As such, it should be a free kick.
      • However before seeking adjudication they must first issue the principal with a notice of their intention to seek adjudication. This then affords the principal with a short additional window to put on a payment schedule, in which case they will be able to make substantive arguments against the claim before the adjudicator.
    2. They are also able to seek a summary judgment in a court. Once again, the principal is not entitled to raise any defence or claim any offset (the consequence of failing to put on a schedule in time). In this instance, there is no obligation to put the principal on notice, nor do they get a second chance to put on a payment schedule. This begs the question, why go down the adjudication path and give the principal a second chance when you can go to court (the ‘curial path’) and shut them out completely? Generally, we will advise a court application as the best option in this circumstance.

3b. Payment Schedule Served

If a valid payment schedule is served, then the dispute can be allocated to an adjudicator. This will result in a very quick determination of the issues, ‘on the papers’ (meaning everything will be done via an exchange of written correspondence, no face-time in court), and that decision will be enforceable as a judgement.

However, this adjudicated decision is not the final say. If you have lost at adjudication and think the outcome was unfair, you can still bring a claim to recover that money. The purpose of this fast-track process is not to resolve disputes in a final sense, it is simply to get money moving on a construction site and avoid the costs associated with delays. So, you may have had to pay the builder more than you wanted, but there is nothing to stop you trying to claw it back through a court claim in the normal process.

Need help with the Building and Construction Industry Security of Payment Act?

Contact Tom Howard Legal