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The Building and Construction Industry (Security of Payment) Act 2009 (ACT) (“SoPA”), along with similar legislation in other Australian jurisdictions, was created by State and Territory governments to assist contractors, subcontractors, consultants, and suppliers in recovering payments due under the terms of construction contracts, whether those construction contracts were written, oral, or a combination of both.
The SoPA grants an entitlement to a progress payment (or payments) for construction works, or the supply of related goods and services, and establishes a recovery procedure for those progress payments. The SoPA creates a “parallel” payment regime which normally runs alongside, but legally separate to, any contractual payment regime.
Payment Claim
To be able to exercise the statutory rights available under the SoPA, a claimant must first issue a payment claim under its construction contract. For a payment claim to be valid, it must comply with the technical requirements prescribed by the SoPA. An invoice issued by a claimant under a construction contract may also be a valid payment claim under the SoPA if it meets the statutory requirements of a payment claim outlined below.
Any valid payment claim must:
- Properly identify the claimant (by its correct legal entity name and details);
- Be served on the respondent by, or on behalf of, the claimant;
- Properly identify the respondent (by its correct legal entity name and details);
- Include (in the ACT) the following words “This is a payment claim made under the Building and Construction Industry (Security of Payment) Act 2009 (ACT)” or words to that effect;
- Clearly identify the construction work, or related goods and services;
- Indicate the amount of the payment claim, including GST; and
- Relate to construction works, or supply of goods and services, performed on or prior to a reference date.
Pitfalls – Making an invalid payment claim
A claimant must be careful to avoid making an invalid payment claim, which will result in it not being allowed to exercise all of its rights under the SoPA, which may result in an adjudicator not being able to make a determination in a claimant’s favour.
Some common issues that may cause a payment claim to be invalid include:
A. Failing to properly identify a respondent or issuing a payment claim to the incorrect respondent/entity.
If the payment claim has been addressed to the wrong entity, it will not be successful in ant subsequent adjudication. A claimant must ensure the payment claim is addressed to the legal entity with which the claimant has formed the construction contract. (e.g. if a claimant had contracted with John Brown trading as J B Building, but issues a payment claim to J B Building Pty Ltd, the payment claim will be invalid, and the claimant will be unable to enforce any subsequent adjudication determination.)
B. Failing to include the endorsement referred to in point 4 above.
Without the proper endorsement, notwithstanding that an invoice may be a valid invoice under the construction contract, it will NOT be a valid payment claim for the purposes of the SoPA.
C. Making a payment claim on the wrong date
A claimant can only issue a valid payment claim to a respondent on, and after, each reference date, and the sum claimed for work performed (or goods/services supplied) can only be for work performed on, or prior to, each reference date. Multiple payment claims cannot be made in relation to the same reference date.
A reference date is either the date stated in the construction contract for making progress claims or, if the construction contract does not state a date, it is the last day of each named month. Where a claimant claims for work performed after a reference date, that claim may render the whole payment claim invalid. A payment claim under SoPA will also be invalid if it is served before a reference date has arisen (under either the contract or the SoPA).
The SoPA also provides that a payment claim may only be made up to 12 months from the date the construction work, or supply of goods, was made, unless the construction contract allows for a longer period. Any progress claim made after the expiry of the 12 month (or longer) period may be invalid.
D. Failing to adequately identify the construction works or related goods/services supplied
The payment claim may be invalid where it does not include all information necessary for a respondent to be able to both (i) identify the construction work or related goods and services claimed and (ii) how the sum claimed in the payment claim is calculated.
A payment claim under the SoPA must only claim for construction works undertaken, or related goods and services supplied, within the ACT. The SoPA excludes any construction work undertaken, or related goods and services supplied, outside of the ACT.
For any building and construction related enquiries, including those related to the Building and Construction Industry (Security of Payment) Act 2009 (ACT), please contact Harry Kay at harry@terraconlegal.com.au
Note: this is not legal advice and should not be relied upon (as it is general in nature, and will differ depending on factual circumstances). Legal advice should only be relied upon if Terracon Legal has been formally engaged via a cost agreement to provide such advice, and it is given specific facts and context provided.