Security of Payment (SA)

The Building and Construction (Security of Payment) Act (2009) (SA) (“the SOP Act”) provides a statutory right to progress payments for a party who is owed money under a construction contract. A party can enforce its rights to those progress payments through the use of the adjudication process under the SOP Act. The adjudication process provides for a quick means of determining, on an interim basis, the liability of a respondent to pay a claimant a progress payment.

Payment Claim

Under the SOP Act, a party who is entitled to submit a progress claim may serve a payment claim on another party who is or may be liable to make the payment under the construction contract. While the requirements of the SOP Act vary from state to state, the requirements of a payment claim under the SOP Act (SA) are that it must:

  • Identify the construction work to which the progress payment relates;
  • Indicate the amount of the progress payment that the claimant claims to be due (the claimed amount); and
  • State that it is made under the SOP Act.

In considering the requirements of payment claim, the Courts (examining wording similar or identical to the SOP Act (SA)) have found that:

  • Relevant construction work must be identified sufficiently to enable the respondent to understand the basis of the claim (Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229);
  • To determine whether the claim sufficiently identifies the work, the Court will take into account the background knowledge of each of the parties on the basis of their past dealings and/or exchanges of documentation (Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (In Liq) [2005] NSWCA 409);
  • Construction work may include delay damages and interest payable under the construction contract.

Payment Schedule

Again, while the SOP legislation varies across the states, a payment schedule under the SOP Act (SA):

  • Must identify the payment claim to which it relates; and
  • Must indicate the amount of the payment (if any) that the respondent proposes to make (a scheduled amount); and
  • 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.

In addition to the matters set out in the case summary on the alternate, it is important to remember that failing to provide a payment schedule within the required timeframe may mean that the claimant is entitled to seek summary judgment on its payment claim.

Security of Payment (NT)

The security of payment legislation enacted in the NT is entitled the Construction Contracts (Security of Payments) Act 2004 (“the NT Act”). The NT Act differs from the SOP Act (SA) and that adopted in the eastern states. It is instead modeled on the WA security of payment legislation.

However, the object of the NT Act is identical to the other states in that it aims to facilitate the timely payment between contracting parties and to establish a statutory system for rapidly resolving payment disputes in the form of adjudication. For example, it:

  • Prohibits certain payment terms in construction contracts;
  • Implies terms into construction contracts regarding payment if the contract is silent;
  • Provides for a quick adjudication process for determining payment disputes under construction contracts.

Importantly, under the NT Act, a claim for payment can be made by either party to the construction contract (i.e. a principal or contractor). In the eastern states, only the contractor can make a claim for monies which it says is outstanding. However, under the NT Act, the principal, could, for example, make a claim for liquidated damages for delay in reaching practical completion.

Under the NT Act, the adjudication process can only be initiated if a “payment dispute” has arisen.

Summary

While each dispute turns on its own facts, it is important for a party to clearly understand what is required under Security of Payment legislation.  Failure to meet the basic requirements may mean that a party’s payment claim or payment schedule are invalid.

FEG’s experience

Fenwick Elliott Grace has considerable experience with preparing and advising on Payment Claims, Payment Schedules, Adjudication Applications and Adjudication Responses in South Australia, the NT and Australia wide.

We offer a flexible service which can be tailored to your needs.  Please contact us to discuss how we can be of further assistance to you.

In cases where an adjudication decision does not satisfy the payment dispute, the decision can be challenged in the Courts. We have recently acted for the successful parties in the following cases involving questions arising under the SOP Act (SA):

  • Linke Developments Pty Ltd v 21st Century Developments Pty Ltd [2014] SASC 203 (as above);
  • Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84;
  • Kennett Pty Ltd v Janssen & Anor [2014] SASC 164.