General overview of Security of Payment laws in SA
April 30, 2019
Security of Payment in the building and construction industry relates to a building contractor’s right to receive payments that are due and payable as outlined in their contract. Security of Payment legislation provides for a process of obtaining Progress Payments, for example a contractor seeking payment from a principal contractor once the payment becomes due.
This article will focus on Security of Payment laws generally and will be the first articles in a series of Regional news articles which touch on Security of Payment laws in SA.
What does the Act provide?
In South Australia, Security of Payment laws are governed by the Building and Construction Industry Security of Payment Act 2009 (the “Act”). The Act provides for a rapid adjudication mechanism for resolving disputes on an interim basis by allowing a supplier of goods and services (“claimant”) a statutory right to make progress claims, and receive payments when they become due. This is also the case where the building contract has no provisions for progress or milestone payments.
Who can make claims under the Act?
In relation to the building and construction industry
- Suppliers of materials for construction work
- Suppliers of plant and equipment (whether supplied by sale, hire or otherwise) for use in connection with construction work.
- Service providers providing services related to construction work such as Labour, Architectural, Design, Surveying, Engineering, Interior or exterior decoration, Landscaping, Contract management, Consultancy and Project management.
What should be done if a claim is received?
If the respondent (generally the principal contractor) receives a claim made under the Act, and the claim is disputed, the respondent must set out the reasons in a payment schedule.
If the respondent fails to provide a payment schedule within the strict time limits (15 business days) then they may be liable to pay the full amount. The claimant may recover the full amount in court.
If the respondent provides a payment schedule, and the amount claimed is disputed, the claimant may take the next step of applying to have an independent adjudicator determine the dispute.
Members need to be aware that there have been cases where the principal contractors have failed to provide a payment schedule within the time limits and as a result of that, adjudication decisions were made against them. That is because the reasons for not making payment could not be considered as part of the adjudication because it was not provided in the payment schedule.
For smaller businesses, it can be difficult to stay on top of the paperwork, daily mails and invoices if resources are limited. If this is you, then it is important to ensure that there is a process in place to identify invoices or claims made under the Act early, to ensure you have sufficient time to respond.
In the next article, we will focus on the frequently asked questions in relation to Security of Payments so if you have a question you would like answered, please give HIA Workplace Services a call on (08) 8340 5900.