Building and Construction Industry Security of Payment Act 1999 (NSW)

Building and Construction Industry Security of Payment Act 1999 No 46 An Act with respect to payments for construction work carried out, and related goods and services supplied, under construction contracts; and for other purposes. Part 1 Preliminary 1 Name of Act This Act is the Building and Construction Industry Security of Payment Act 1999. 2 Commencement This Act commences on a day or days to be appointed by proclamation. 3 Object of Act (1) The object of this Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services. (2) The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments. (3) The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves— (a) the making of a payment claim by the person claiming payment, and (b) the provision of a payment schedule by the person by whom the payment is payable, and (c) the referral of any disputed claim to an adjudicator for determination, and (d) the payment of the progress payment so determined. (4) It is intended that this Act does not limit— (a) any other entitlement that a claimant may have under a construction contract, or (b) any other remedy that a claimant may have for recovering any such other entitlement. 4 Definitions (1) In this Act— adjudicated amount means the amount of a progress payment that an adjudicator determines to be payable, as referred to in section 22. adjudication application means an application referred to in section 17. adjudication certificate means a certificate provided by an authorised nominating authority under section 24. adjudication fees means any fees or expenses charged by an authorised nominating authority, or by an adjudicator, under this Act. adjudication response means a response referred to in section 20. adjudicator, in relation to an adjudication application, means the person appointed in accordance with this Act to determine the application. authorised nominating authority means a person authorised by the Minister under section 28 to nominate persons to determine adjudication applications. business day means any day other than— (a) a Saturday, Sunday or public holiday, or (b) 27, 28, 29, 30 or 31 December. claimant means a person by whom a payment claim is served under section 13. claimed amount means an amount of a progress payment claimed to be due for construction work carried out, or for related goods and services supplied, as referred to in section 13. construction contract means a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party. construction work is defined in section 5. Department means the department in which this Act is administered. due date, in relation to a progress payment, means the due date for the progress payment, as referred to in section 11. exempt residential construction contract means— (a) a construction contract that is connected with an owner occupier construction contract, or (b) any other type of construction contract for the carrying out of residential building work that is prescribed by the regulations for the purposes of this definition. exercise a function includes perform a duty. function includes a power, authority or duty. head contractor means the person who is to carry out construction work or supply related goods and services for the principal under a construction contract (the main contract) and for whom construction work is to be carried out or related goods and services supplied under a construction contract as part of or incidental to the work or goods and services carried out or supplied under the main contract. Note— There is no head contractor when the principal contracts directly with subcontractors. owner occupier construction contract means a construction contract for the carrying out of residential building work within the meaning of the Home Building Act 1989 on such part of any premises as the party for whom the work is carried out resides or proposes to reside in. payment claim means a claim referred to in section 13. payment schedule means a schedule referred to in section 14. principal means the person for whom construction work is to be carried out or related goods and services supplied under a construction contract (the main contract) and who is not themselves engaged under a construction contract to carry out construction work or supply related goods and services as part of or incidental to the work or goods and services carried out or supplied under the main contract. progress payment means a payment to which a person is entitled under section 8, and includes (without affecting any such entitlement)— (a) the final payment for construction work carried out (or for related goods and services supplied) under a construction contract, or (b) a single or one-off payment for carrying out construction work (or for supplying related goods and services) under a construction contract, or (c) a payment that is based on an event or date (known in the building and construction industry as a "milestone payment"). recognised financial institution means a bank or any other person or body prescribed by the regulations for the purposes of this definition. related goods and services is defined in section 6. respondent means a person on whom a payment claim is served under section 13. scheduled amount means the amount of a progress payment that is proposed to be made under a payment schedule, as referred to in section 14. Secretary means the Secretary of the Department. subcontractor means a person who is to carry out construction work or supply related goods and services under a construction contract otherwise than as head contractor. Note— A subcontractor's contract can be with the head contractor or (when there is no head contractor) with the principal directly. Note— The Interpretation Act 1987 contains definitions and other provisions that affect the interpretation and application of this Act. (2) A reference in this Act to a contract that is connected with an owner occupier construction contract is a reference to a construction contract to carry out construction work or supply related goods and services as part of or incidental to the work or goods and services carried out or supplied under the owner occupier construction contract. (3) Notes included in this Act do not form part of this Act. 5 Definition of "construction work" (1) In this Act, construction work means any of the following work— (a) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not), (b) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, power-lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage or coast protection, (c) the installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems, (d) the external or internal cleaning of buildings, structures and works, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension, (e) any operation which forms an integral part of, or is preparatory to or is for rendering complete, work of the kind referred to in paragraph (a), (b) or (c), including— (i) site clearance, earth-moving, excavation, tunnelling and boring, and (ii) the laying of foundations, and (iii) the erection, maintenance or dismantling of scaffolding, and (iv) the prefabrication of components to form part of any building, structure or works, whether carried out on-site or off-site, and (v) site restoration, landscaping and the provision of roadways and other access works, (f) the painting or decorating of the internal or external surfaces of any building, structure or works, (g) any other work of a kind prescribed by the regulations for the purposes of this subsection. (2) Despite subsection (1), construction work does not include any of the following work— (a) the drilling for, or extraction of, oil or natural gas, (b) the extraction (whether by underground or surface working) of minerals, including tunnelling or boring, or constructing underground works, for that purpose, (c) any other work of a kind prescribed by the regulations for the purposes of this subsection. 6 Definition of "related goods and services" (1) In this Act, related goods and services, in relation to construction work, means any of the following goods and services— (a) goods of the following kind— (i) materials and components to form part of any building, structure or work arising from construction work, (ii) plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work, (b) services of the following kind— (i) the provision of labour to carry out construction work, (ii) architectural, design, surveying or quantity surveying services in relation to construction work, (iii) building, engineering, interior or exterior decoration or landscape advisory services in relation to construction work, (c) goods and services of a kind prescribed by the regulations for the purposes of this subsection. (2) Despite subsection (1), related goods and services does not include any goods or services of a kind prescribed by the regulations for the purposes of this subsection. (3) In this Act, a reference to related goods and services includes a reference to related goods or services. 7 Application of Act (1) Subject to this section, this Act applies to any construction contract, whether written or oral, or partly written and partly oral, and so applies even if the contract is expressed to be governed by the law of a jurisdiction other than New South Wales. (2) This Act does not apply to— (a) a construction contract that forms part of a loan agreement, a contract of guarantee or a contract of insurance under which a recognised financial institution undertakes— (i) to lend money or to repay money lent, or (ii) to guarantee payment of money owing or repayment of money lent, or (iii) to provide an indemnity with respect to construction work carried out, or related goods and services supplied, under the construction contract, or (b) (Repealed) (c) a construction contract under which it is agreed that the consideration payable for construction work carried out under the contract, or for related goods and services supplied under the contract, is to be calculated otherwise than by reference to the value of the work carried out or the value of the goods and services supplied. (3) This Act does not apply to a construction contract to the extent to which it contains— (a) provisions under which a party undertakes to carry out construction work, or supply related goods and services, as an employee (within the meaning of the Industrial Relations Act 1996) of the party for whom the work is to be carried out or the related goods and services are to be supplied, or (b) provisions under which a party undertakes to carry out construction work, or to supply related goods and services, as a condition of a loan agreement with a recognised financial institution, or (c) provisions under which a party undertakes— (i) to lend money or to repay money lent, or (ii) to guarantee payment of money owing or repayment of money lent, or (iii) to provide an indemnity with respect to construction work carried out, or related goods and services supplied, under the construction contract. (4) This Act does not apply to a construction contract to the extent to which it deals with— (a) construction work carried out outside New South Wales, and (b) related goods and services supplied in respect of construction work carried out outside New South Wales. (5) This Act does not apply to any construction contract, or class of construction contracts, prescribed by the regulations for the purposes of this section. Part 2 Rights to progress payments 8 Right to progress payments (1) A person who, under a construction contract, has undertaken to carry out construction work or to supply related goods and services is entitled to receive a progress payment. (2) A person is not entitled to a progress payment under subsection (1) if the construction contract— (a) does not comply with the Home Building Act 1989, section 4, or (b) involves construction work that is residential building work done in contravention of the Home Building Act 1989, section 92. 9 Amount of progress payment The amount of a progress payment to which a person is entitled in respect of a construction contract is to be— (a) the amount calculated in accordance with the terms of the contract, or (b) if the contract makes no express provision with respect to the matter, the amount calculated on the basis of the value of construction work carried out or undertaken to be carried out by the person (or of related goods and services supplied or undertaken to be supplied by the person) under the contract. 10 Valuation of construction work and related goods and services (1) Construction work carried out or undertaken to be carried out under a construction contract is to be valued— (a) in accordance with the terms of the contract, or (b) if the contract makes no express provision with respect to the matter, having regard to— (i) the contract price for the work, and (ii) any other rates or prices set out in the contract, and (iii) any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount, and (iv) if any of the work is defective, the estimated cost of rectifying the defect. (2) Related goods and services supplied or undertaken to be supplied under a construction contract are to be valued— (a) in accordance with the terms of the contract, or (b) if the contract makes no express provision with respect to the matter, having regard to— (i) the contract price for the goods and services, and (ii) any other rates or prices set out in the contract, and (iii) any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount, and (iv) if any of the goods are defective, the estimated cost of rectifying the defect, and, in the case of materials and components that are to form part of any building, structure or work arising from construction work, on the basis that the only materials and components to be included in the valuation are those that have become (or, on payment, will become) the property of the party for whom construction work is being carried out. 11 Due date for payment (1) Subject to this section and any other law, a progress payment to be made under a construction contract is payable in accordance with the applicable terms of the contract. (1A) A progress payment to be made by a principal to a head contractor under a construction contract (other than an exempt residential construction contract) becomes due and payable on— (a) the date occurring 15 business days after a payment claim is made under Part 3 in relation to the payment, except to the extent paragraph (b) applies, or (b) an earlier date as provided in accordance with the terms of the contract. (1B) A progress payment to be made to a subcontractor under a construction contract (other than an exempt residential construction contract) becomes due and payable on— (a) the date occurring 20 business days after a payment claim is made under Part 3 in relation to the payment, except to the extent paragraph (b) applies, or (b) an earlier date as provided in accordance with the terms of the contract. (1C) A progress payment to be made under an exempt residential construction contract becomes due and payable— (a) on the date on which the payment becomes due and payable in accordance with the terms of the contract, or (b) if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made under Part 3 in relation to the payment. (2) Interest is payable on the unpaid amount of a progress payment that has become due and payable at the rate— (a) prescribed under section 101 of the Civil Procedure Act 2005, or (b) specified under the construction contract, whichever is the greater. (3) If a progress payment becomes due and payable, the claimant is entitled to exercise a lien in respect of the unpaid amount over any unfixed plant or materials supplied by the claimant for use in connection with the carrying out of construction work for the respondent. (4) Any lien or charge over the unfixed plant or materials existing before the date on which the progress payment becomes due and payable takes priority over a lien under subsection (3). (5) Subsection (3) does not confer on the claimant any right against a third party who is the owner of the unfixed plant or materials. (6) Except as otherwise provided by this section, the rules and principles of the common law and equity apply to the determination of priorities between a lien under subsection (3) over any unfixed plant and materials and any other interest in the plant and materials. (7) Section 73(2) of the Personal Property Securities Act 2009 of the Commonwealth is declared to apply to liens under subsection (3). (8) A provision in a construction contract has no effect to the extent it allows for payment of a progress payment later than the relevant date it becomes due and payable under subsection (1A) or (1B). 12 Effect of "pay when paid" provisions (1) A pay when paid provision of a construction contract has no effect in relation to any payment for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) under the contract. (2) In this section— money owing, in relation to a construction contract, means money owing for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) under the contract. pay when paid provision of a construction contract means a provision of the contract— (a) that makes the liability of one party (the first party) to pay money owing to another party (the second party) contingent on payment to the first party by a further party (the third party) of the whole or any part of that money, or (b) that makes the due date for payment of money owing by the first party to the second party dependent on the date on which payment of the whole or any part of that money is made to the first party by the third party, or (c) that otherwise makes the liability to pay money owing, or the due date for payment of money owing, contingent or dependent on the operation of another contract. 12A Trust account requirements for retention money (1) The regulations may make provision for or with respect to requiring retention money to be held in trust for the subcontractor entitled to the money and requiring the head contractor who holds retention money to pay the money into a trust account (a retention money trust account) established and operated in accordance with the regulations. (2) The regulations may provide for the trust account into which retention money is to be paid to be a trust account established with a financial institution by the head contractor or a trust account established and operated by the Small Business Commissioner. (3) Without limitation, the regulations under this section may include provision for or with respect to the following— (a) the procedures to be followed in connection with the authorisation of payments out of a retention money trust account, (b) the keeping of records in connection with the operation of a retention money trust account and the inspection of those records by the Small Business Commissioner or the subcontractor entitled to the retention money, (c) the resolution of disputes in connection with the operation of a retention money trust account. (4) A regulation may create an offence punishable by a penalty not exceeding 1,000 penalty units for any failure to comply with the requirements of the regulations under this section. (5) In this section, retention money means money retained by a head contractor out of money payable by the head contractor to a subcontractor under a construction contract, as security for the performance of obligations of the subcontractor under the contract. Part 3 Procedure for recovering progress payments Division 1 Payment claims and payment schedules 13 Payment claims (1) A person referred to in section 8 who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (1A) A payment claim may be served on and from the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and on and from the last day of each subsequent named month. (1B) However, if the construction contract concerned makes provision for an earlier date for the serving of a payment claim in any particular named month, the claim may be served on and from that date instead of on and from the last day of that month. (1C) In the case of a construction contract that has been terminated, a payment claim may be served on and from the date of termination. (2) A payment claim— (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and (c) must state that it is made under this Act. (3) The claimed amount may include any amount— (a) that the respondent is liable to pay the claimant under section 27(2A), or (b) that is held under the construction contract by the respondent and that the claimant claims is due for release. (4) A payment claim may be served only within— (a) the period determined by or in accordance with the terms of the construction contract, or (b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied), whichever is the later. (5) Except as otherwise provided for in the construction contract, a claimant may only serve one payment claim in any particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in that month. (6) Subsection (5) does not prevent the claimant from— (a) serving a single payment claim in respect of more than one progress payment, or (b) including in a payment claim an amount that has been the subject of a previous claim, or (c) serving a payment claim in a particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in a previous named month. (7) A head contractor must not serve a payment claim on the principal unless the claim is accompanied by a supporting statement that indicates that it relates to that payment claim. Maximum penalty—1,000 penalty units in the case of a corporation or 200 penalty units in the case of an individual. (8) A head contractor must not serve a payment claim on the principal accompanied by a supporting statement knowing that the statement is false or misleading in a material particular in the particular circumstances. Maximum penalty—1,000 penalty units in the case of a corporation or 200 penalty units or 3 months imprisonment (or both) in the case of an individual. (9) In this section— supporting statement means a statement that is in the form approved by the Secretary and (without limitation) that includes a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned. Note— An offence against subsection (7) or (8) committed by a corporation is an executive liability offence attracting executive liability for a director or other person involved in the management of the corporation—see section 34D. 14 Payment schedules (1) A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant. (2) A payment schedule— (a) must identify the payment claim to which it relates, and (b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount). (3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment. (4) If— (a) a claimant serves a payment claim on a respondent, and (b) the respondent does not provide a payment schedule to the claimant— (i) within the time required by the relevant construction contract, or (ii) within 10 business days after the payment claim is served, whichever time expires earlier, the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates. 15 Consequences of not paying claimant where no payment schedule (1) This section applies if the respondent— (a) becomes liable to pay the claimed amount to the claimant under section 14(4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and (b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates. (2) In those circumstances, the claimant— (a) may— (i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii) make an adjudication application under section 17(1)(b) in relation to the payment claim, and (b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract. (3) A notice referred to in subsection (2)(b) must state that it is made under this Act. (4) If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt— (a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and (b) the respondent is not, in those proceedings, entitled— (i) to bring any cross-claim against the claimant, or (ii) to raise any defence in relation to matters arising under the construction contract. 16 Consequences of not paying claimant in accordance with payment schedule (1) This section applies if— (a) a claimant serves a payment claim on a respondent, and (b) the respondent provides a payment schedule to the claimant— (i) within the time required by the relevant construction contract, or (ii) within 10 business days after the payment claim is served, whichever time expires earlier, and (c) the payment schedule indicates a scheduled amount that the respondent proposes to pay to the claimant, and (d) the respondent fails to pay the whole or any part of the scheduled amount to the claimant on or before the due date for the progress payment to which the payment claim relates. (2) In those circumstances, the claimant— (a) may— (i) recover the unpaid portion of the scheduled amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii) make an adjudication application under section 17(1)(a)(ii) in relation to the payment claim, and (b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract. (3) A notice referred to in subsection (2)(b) must state that it is made under this Act. (4) If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the scheduled amount from the respondent as a debt— (a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and (b) the respondent is not, in those proceedings, entitled— (i) to bring any cross-claim against the claimant, or (ii) to raise any defence in relation to matters arising under the construction contract. Division 2 Adjudication of disputes 17 Adjudication applications (1) A claimant may apply for adjudication of a payment claim (an adjudication application) if— (a) the respondent provides a payment schedule under Division 1 but— (i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or (ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount, or (b) the respondent fails to