In New South Wales, claimants may make claims under the Building and Construction Industry Security of Payment Act 1999 (“BCISOP Act”) against respondents.
However there a number of concepts that should be understood before using the rapid adjudication system specified in the legislation. Claimants should make sure they are aware of these concepts before engaging the adjudication process.
ABC DRS has provided a neat summary of the key areas of the BCISOP Act that a potential claimant should become familiar with.
After reading the information below you should be able to:
- Understand the role of the claimant and have a basic knowledge of what kind of contracts are applicable to the BCISOP Act.
- Know when you can make a valid payment claim and understand the concept of ‘reference dates’.
- Identify a payment schedule.
- Know under what circumstances you should serve a Notice of Intent to Apply for Adjudication.
On this page:
- What is a claimant and what is a construction contract.
- Domestic building work, owner builders and licensing.
- What can be claimed and when?
- Reference dates.
- Formatting and serving a payment claim.
- After the payment claim is served.
- Payment schedules.
- I haven’t received a valid payment schedule!
- Suspending work.
- Choosing adjudication.
- Find out more.
Please be aware that the information on this webpage is intended as a general guide only and does not constitute formal legal advice.
ABC DRS does not provide legal advice. ABC DRS always recommends seeking professional help when preparing the required documentation for pursuing adjudication under the BCISOP Act.
The BCISOP Act defines a claimant as follows:
- A person or entity that has undertaken construction work or the supply of related goods and services. This work is undertaken in accordance with a construction contract, which may be written, oral, or partially written and partially oral.
A claimant may make a payment claim on a respondent for work performed under a construction contract. The respondent is the entity required to make payment under the contract.
Some example contractual relationships between claimants and respondents might include:
- Contractors serving claims on developers/principals.
- Subcontractors performing works for contractors.
- Suppliers invoicing customers.
- Plant and equipment hire companies claiming against commercial customers.
The BCISOP Act is wide ranging and catches many different claimant-respondent relationships within the New South Wales construction industry.
The intent of this legislation is to catch as many different claimant-respondent contractual relationships within the New South Wales construction industry as possible. This includes work that may be simply related to the undertaking of construction – such as specialist jobs like surveying, architecture, or consultants.
If its related to construction, there is a good chance your contract may be covered by the BCISOP Act.
However, there are some exceptions, most notably with regards to mining and mineral extraction.
Furthermore, the BCISOP Act is limited to commercial construction contracts and, in most cases, claims against customers dealing in domestic building work are excluded from the operation of this act and therefore unable to be adjudicated upon.
An important exclusion from the operation of the BCISOP Act is domestic building work. If the respondent intends to reside in the premises to which the construction contract relates (typically a residential home), then those contracts do not fall under the jurisdiction of the legislation.
However, if the respondent holds an owner-builder’s license, or should posses an owner-builder’s license, then claims against these types of respondents may be valid for the purposes of the legislation.
ABC DRS recommends seeking professional advice if you suspect the respondent you are working for may be an owner-builder or if the construction contract relates to domestic building work.
Furthermore, in New South Wales, many contractors and subcontractors are required to hold licences to undertake construction work. The BCISOP Act requires claimants to hold the correct licences in order to make a claim under the legislation.
If the claimant does not hold the correct licences for the construction work being undertaken, there is a large risk that their payment claims will be rejected either during the adjudication process or in further court proceedings.
The claimant may claim a progress payment on and from each ‘reference date’ under a construction contract.
The amount claimed is usually calculated by the method named in the contract, or, if no method of calculation exists, it is done on the basis of the value of the work carried out.
Some examples of entitlements that can be claimed include:
- Retention monies due for release.
- Damages associated with suspension of work.
- Interest on overdue progress payments.
- Extension of time costs.
- Variations and other types of claims under the contract.
One important restriction is that payment claims may only be served within the 12 months after the construction work was carried out. For example, if the works subject to the claim were completed on 31 January 2014, the claimant would only be able to claim up until 31 January 2015. If you suspect you may be at risk of breaching this restriction, you should seek professional advice.
Figuring out the reference date can often be a confusing task.
Essentially the reference date is the date stated in your contract for the service of progress payment claims or tax invoices.
If your contract does not have an explicit reference date stated, the BCISOP Act defines a reference date as the end of the month in which the work was performed. This might often be the reference date when it comes to oral contracts.
Example: reference dates
An example might be that your contract says that you are to submit tax invoices on the 25th day of any month for work done up until that day. Progress payment claims must be submitted on and from that day – meaning you cannot submit a payment claim early. However, you can submit from a reference date, meaning you can submit after the nominated date in the contract has come and gone.
Furthermore you can only submit one payment claim per reference day. If you submitted a claim on the 25th of January 2014 in the preceding example, your next date for submitting a payment claim would be the 25th of February 2014.
A payment claim must have certain attributes in order to be valid under the legislation.
Essentially the claim must:
- Identify the construction work or related goods and services to which the claim relates.
- Indicate the payment amount that the claimant claims to be payable.
The above rules can be incorporated into a tax invoice. Furthermore, you may attach a document to a tax invoice that adheres to these rules.
ABC DRS provides an example claim that may be used with a tax invoice.
The claimant must also take careful steps in serving a payment claim. The serving of a payment claim should be done in conjunction with the terms set out in the construction contract. If there is no rules set out in the construction contract, the BCISOP Act provides a set of rules under section 31 of the legislation specifically called ‘service of notices’.
Good practice is to serve the same claim by a number of means – including fax and express post. The claimant should also keep good records and proof of service as adjudicators often request these documents should the payment claim result in an adjudication application.
Once the payment claim is served, a number of scenarios can occur.
- Firstly, the respondent pays the claim in full on the due date for payment.
- Secondly, the respondent does not pay the full amount on the due date for payment. The respondent also serves a valid payment schedule, setting out their reasons for non-payment within ten business days of being served with the payment claim.
- Thirdly, the respondent does not pay the full amount by the due date for payment.
If the latter two scenarios arise, there are a number of options available to claimants under the BCISOP Act. These options are dealt with in the following sections.
A payment schedule is a document served by the respondent on the claimant in response to a payment claim. It is a document that sets out the amount the respondent intends to pay and, if that amount is less than the payment claim, the reasons why it is less.
A valid payment schedule must have the following attributes:
- It must indicate the payment claim to which it relates. This usually should be explicit, but can be as simple as stating something similar to “with reference to your payment claim dated 01/01/2014”.
- It must state the payment amount the respondent intends to make. This is the scheduled amount. Usually this would be some kind of dollar value, but may be scheduled as zero dollars or ‘nil’. It should be made abundantly clear to the claimant how much the respondent intends to pay.
- If the scheduled amount is less than the claimed amount, the payment schedule must state reasons why the amount is less. If the respondent is withholding payment for any reason, those reasons should clearly stated on the payment schedule.
Absence of any of these rules may mean a payment schedule is invalid.
Furthermore, the payment schedule must be served on the claimant within 10 business days of the respondent being served with a valid payment claim.
If the claimant receives a valid payment schedule and disagrees with the reasons or valuation given on the document, they may choose to apply for adjudication of the dispute.
The respondent is required to pay the amount they schedule in a payment schedule by the usual due date for payment.
If you haven’t received a valid payment schedule and you do not receive full payment of your payment claim by the due date for payment, you have a number of options available under the BCISOP Act (presuming you’ve served a valid payment claim).
- Put in motion the adjudication process by serving a Notice of Intent to Apply for Adjudication.
- Recover the unpaid portion of the claimed amount as a debt owing in a court of competent jurisdiction.
- File a notice of your intention to suspend work or supply of goods and services.
In many cases, claimants may want to apply for adjudication of the payment claim. In this situation, you must supply a Notice of Intent to Apply For Adjudication.
This is a notice that signal’s the claimant’s intent to file an adjudication application and also gives the respondent a chance to serve a payment schedule.
This notice must be served on the respondent within 20 business days of the due date for payment of the payment claim (not the date when the schedule was originally due).
The notice must also state that the respondent may serve a payment schedule within five business days after receiving the notice.
If no payment schedule is received after five business days of serving this notice, the claimant may immediately apply for adjudication. Also, if a payment schedule is received that the claimant disagrees with, they may also immediately apply for adjudication.
The ABC DRS provides an example Notice of Intent To Apply For Adjudication that you can download and model for your own specific scenario.
If a valid payment schedule has not been served on a claimant, or the scheduled amount has not been paid, the claimant may choose to suspend work under the BCISOP Act.
With regards to suspending work, the BCISOP Act states that the claimant can recover any expense or loss in relation to the suspension of work.
Furthermore, the claimant is not liable for any loss or damage suffered by the respondent during the period of suspension. The specific details of how to suspend are covered in section 27 of the legislation.
However, the claimant must give the respondent written notice of their intention to suspend. Suspension may be undertaken two business days after the Notice of Suspension has been served on the respondent.
It is recommended that prior to suspending works or supply of goods and services that you consult your legal representative for further advice.
ABC DRS have a pro-forma example of a notice for suspending work that you are free to use.
Adjudication is a form of alternative dispute resolution that allows construction disputes to be decided quickly and in a relatively economical fashion.
The BCISOP Act permits claimants to have their dispute adjudicated by an impartial and independent industry adjudicator in lieu of using the usual court system.
If a respondent has failed to provide payment, a valid payment schedule or has provided a payment schedule that you disagree with, you can opt to have your payment dispute adjudicated upon.
The process, while simpler than the court system, does require some deeper explanation. ABC DRS has provided an online guide to using adjudication in New South Wales.
Alternatively if you’re already familiar with the process, you’re more than welcome to download and complete our adjudication application form.
We appreciate that much of the information presented above may be complex and sometimes difficult to understand. However, our trained staff are more than willing to assist on how to use the BCISOP Act so feel free to get in touch.
Additionally, ABC DRS also offer specific training for understanding and using the BCISOP Act.