Recent changes to the Building Security of Payments Legislation – Restrictions on Company in Liquidation

02/04/2019

In New South Wales, there is a system for Contractors (and Sub-Contractors) in building projects to recover moneys owed to them “quickly”. This system has been put in place under the Building and Construction Industry Security of Payments Act (SOP Act).  There are some exceptions in the SOP Act.  This Act is a law of the NSW parliament.

The SOP Act provides that Contractors who claim they are owed money can lodge a claim which can be dealt with much more quickly than under the Court system.  An Application for Adjudication can be made after making a claim in certain circumstances. A Contractor who lodges a claim may expect to receive a written Certificate of a decision within a month. The Contractor may then use that Certificate to obtain a written Judgment in Court.

Changes to the security legislation were passed on 21 November 2018 however the changes have not yet commenced operation.  The changes will only commence when the “assent” of the Parliament is provided.  We anticipate that the changes will commence shortly.

One of the changes is that the SOP Act now states that a Corporation in liquidation may not serve a Payment Claim or enforce a Payment Claim or an Adjudication Application.

An example of this might be where a Sub-Contractor on an office building project Contracts to supply and fit a kitchen into the office and that Sub-Contractor comprises a Corporation. That Sub-Contractor has not been paid for its work in fitting the kitchen but due to its indebtedness goes into liquidation. The new legislation states that the Sub-Contractor, as a result of being insolvent, may not apply for an Adjudication of its claim for unpaid money.

The second change is that there is an abolition of the reference date in Applications for Adjudications.  Currently there needs to be a reference date before a person can apply for an Adjudication under the legislation. Without a reference date, an Applicant cannot succeed. A reference date is the date from which the Contractor’s claim (the Payment Claim) is calculated.

However the new legislation provides that 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 under the Contract. The claim may also be served on and from an earlier date than the last day of the month if the Contract provides this. There is also an express right to serve a Payment Claim on and from the date of termination of the Contract.

Security of Payment applications are a “relatively” quick method of recovering moneys owed under Building Contracts to Contractors.  Watson & Watson can assist you in preparing applications and in all types of building disputes including Court cases and Tribunal matters. Watson & Watson will also advise you on Building Contracts.  

If you are proposing to serve a Payment Claim for unpaid work or have any concerns regarding an Adjudication Application or service of a Payment Claim by or on you, please contact Richard Watson Accredited Specialist Building & Construction or his Personal Assistant Shereen Da Gloria to discuss your concerns. 

Be prepared and seek the appropriate advice in light of the changes to the SOP Act about to come into effect.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.