When entering into a contract for building and construction work it is important for all parties to understand what the process is if a dispute arises over payment of money under the contract.
The law covering security of payments in the ACT is the Building and Construction Industry (Security of Payment) Act 2009 which applies to construction contracts entered into after 1 July 2010.
The law applies to any contract or other arrangement to carry out construction work (or supply of related goods and services) within the ACT.
Regardless of whether the contract is written or oral, if a dispute arises about payment there is a legislated process to resolve the dispute.
It will help you understand the process better if you know what the various terms mean and the steps and time limits involved in the process.
What is construction work?
Construction work includes construction, alteration, repair, maintenance and demolition of most structures that can be fixed to land which will cover most construction contracts and consultancy agreements. Exclusions are limited to mining operations.
Are there any exceptions?
The law does not apply in limited circumstances, importantly the exceptions include a construction contract for residential building work if the owner lives or intends to live in the building.
When can contractors make a claim?
A claim for a progress payment (progress claim) can only be made on the date specified in the contract.
If there is no date specified, then the progress claim can be made on the last day of each month. Only one progress claim may be served for each date specified.
How does a contractor make a progress claim?
A contractor makes a progress claim by serving the progress claim on the person who is liable to make the payment under the construction contract (respondent).
A progress claim must:
- identify the construction work or related goods and services;
- specify the amount of the progress claim; and
- state that it is made under the applicable law.
Responding to a progress claim
Once a progress claim is served the person receiving the claim must respond by serving the Contractor with a payment schedule setting out the amount that the respondent proposes to pay.
When to serve a payment schedule
The respondent must serve the payment schedule within 10 business days of receiving the progress claim or any shorter time that is stated in the contract.
What must be included in the payment schedule?
The payment schedule must:
- identify the relevant progress claim;
- indicate how much the respondent proposes to pay (scheduled amount); and
- if the scheduled amount is less than the claimed amount, explain why and any reasons for withholding.
What amount must be paid?
If the respondent does not provide a payment schedule within the time limit, it must pay the full amount of the progress claim.
If the respondent does provide a payment schedule, it must pay the scheduled amount.
When is payment due?
A progress payment becomes due and payable on:
- a date determined in accordance with the construction contract; or
- if the contract does not specify a particular date, payment is due 10 business days after service of the progress claim.
Contractor’s rights if not paid – how to enforce its rights
The Contractor may recover the unpaid portion of the claimed amount from the respondent, as a debt due to the Contractor or make an adjudication application for adjudication in relation to the payment claim
What is adjudication?
Adjudication is when an experienced, qualified and independent adjudicator is appointed to review a payment dispute, and if satisfied that some payment is due, make a determination for money to be paid.
Appointment of the adjudicator
An adjudicator is appointed by an authorised nominating authority, chosen by the claimant. The adjudicator has wide powers to decide how to assess the claim, whether to seek more information, to invite the parties to meet in a conference or to inspect or test the work.
After the adjudicator’s determination
In most cases the parties will be satisfied with the adjudicator’s determination and end the dispute. Where a party is not satisfied, that party can continue to use the dispute resolution processes in the contract or the courts to finally resolve the dispute.
A Contractor may exercise a lien over any unfixed plant or materials which the Contractor has supplied for use in the construction work for the respondent, where a progress payment becomes due and payable but remains unpaid.
Right to suspend work
A Contractor may also suspend construction work being carried out or related goods and services being supplied (with at least 3 business days notice).
If you are unsure about making or responding to a claim or what you need to do, you should seek advice from a lawyer or a construction industry expert. It is important to adhere to the procedures and comply with the relevant time limits.
If you need more information or if you need assistance or advice on how to proceed please call us on 02 6280 8899 or email firstname.lastname@example.org.