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Security of Payments

NSW

A practical guide facilitating quick and efficient debt recovery of outstanding payments for clients in the building and construction industry in New South Wales.

1 Matter Plan

Overview

The commentary covers the recovery process, enabling practitioners to confidently act for both claimants and respondents and to comply with all requirements of the Building and Construction Industry Security of Payment Act 1999. Debt recovery procedures under the Contractors Debts Act 1997 are also covered.

The Reference materials folder includes guidance on electronic signing and witnessing, and the comprehensive Getting the matter underway folder includes compliance and client care documents. Using the extensive Retainer Instructions when gathering information ensures nothing is missed.

Precedents in this publication include:

  • Letter of demand incorporating payment claim;
  • Example – Payment schedule;
  • Statement of liquidated claim with example content;
  • Precedents for filing an adjudication certificate as a judgment date.
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1 Matter Plan Included

  • Item icon ALERTS - Nil
  • Item icon Full Commentary - Security of Payments - Building and Construction Industry
  • Folder icon Reference materials
    • Item icon AI Prompts
      An AI prompt defines a specific task for AI to perform, like drafting a particular document, and provides clear instructions on how to execute that task. The goal is for the AI to quickly create a useful first draft of a document, which the user verifies and refines into a final version, ultimately ...

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    • Item icon Looking to the Future
    • Item icon Electronic Signing and Witnessing
    • Item icon 101 Costs Answers
    • Item icon Further information
  • Item icon Overview
    The ability to quickly and efficiently recover money owing for construction work and the provision of related goods and services is critical to the stability and survival of a business working in the building and construction industry. For many reasons, not always genuine, the liable party will ...

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  • Folder icon A. Getting the matter underway
    • Item icon File cover sheet - Security of payments
    • Item icon First steps
    • Item icon Client details and verifying identity
    • Item icon Retainer instructions - Security of payments
    • Item icon Conflict of interest check
    • Item icon Initial letter to client with costs agreement explaining the process
    • Item icon Costs agreement - NSW
    • Item icon Scope of work - Security of payments - Acting for the claimant
    • Item icon Scope of work - Security of payments - Acting for the respondent
    • Item icon Standard costs disclosure form for clients - Fees under $3000
    • Item icon Time and costs estimates
    • Folder icon If required - Updating costs disclosure
      • Item icon Letter to client updating costs disclosure
      • Item icon Charge securing costs
      • Item icon Guarantee securing costs
      • Folder icon Costs disclosure before settlement in litigation matters
        • Item icon Letter to client - Costs disclosure before settlement - NSW, VIC, and WA
        • Item icon Letter to client - Costs disclosure before settlement - QLD, SA, TAS, ACT, and NT
    • Item icon Who can make a payment claim?
      In order to successfully claim and recover progress payments, strict procedures and timelines must be followed. A complying payment claim must be made in order to activate the payment process: s 13. People who can make a payment claim include:

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    • Item icon What work is covered?
      As previously stated s 5 provides extensive examples of ‘construction work’ and ‘supply of related goods and services’, including the following:

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    • Item icon Right to progress payments
      A person who, under a construction contract, has undertaken to carry out construction work or to supply related goods and services is entitled to receive a progress payment: s 8. This entitlement is no longer triggered by a ‘reference date’, a term that has been abolished from the Act. ...

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    • Item icon The progress claim
      Whilst the term ‘progress claim’ is used as a term of convenience in this commentary to denote a periodic claim made in respect of work performed under a contract, this expression is not used anywhere in the Act. In order for a ‘claim’ in respect of work performed under a contract to entitle a ...

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    • Folder icon General deeds, agreements, execution clauses, and statutory declarations
      • Item icon Deeds and Agreements
      • Folder icon Deeds
        • Item icon Deed for general use
        • Item icon Deed of guarantee
        • Item icon Deed of release
        • Item icon General deed of indemnity
        • Item icon Deed of assignment of agreement
        • Item icon Deed of gift
        • Folder icon Library of standard clauses for deeds
          • Item icon Amendment
          • Item icon Confidentiality for defined information - All parties
          • Item icon Confidentiality for defined information - One party
          • Item icon Confidentiality for terms of deed - All parties
          • Item icon Confidentiality for terms of deed - One party
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Agreements
        • Item icon Agreement for general use
        • Item icon Heads of agreement
        • Item icon Non-disclosure agreement - Formal
        • Item icon Non-disclosure agreement - Informal
        • Folder icon Library of standard clauses for agreements
          • Item icon Amendment
          • Item icon Confidentiality for defined information - All parties
          • Item icon Confidentiality for defined information - One party
          • Item icon Confidentiality for terms of agreement - All parties
          • Item icon Confidentiality for terms of agreement - One party
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Execution clauses
        • Folder icon Library of execution clauses for agreements
          • Item icon Attorney
          • Item icon Authorised officer
          • Item icon Company
          • Item icon Company - Sole director
          • Item icon Individual
          • Item icon Individual - No witness
        • Folder icon Library of execution clauses for deeds
          • Item icon Attorney
          • Item icon Authorised officer
          • Item icon Company
          • Item icon Company - Sole director
          • Item icon Individual
      • Folder icon Statutory declarations
        • Item icon Commonwealth statutory declaration
        • Item icon Statutory declaration - blank - ACT
        • Item icon Statutory declaration - blank - NSW
        • Item icon Statutory declaration - blank - VIC
        • Item icon Statutory declaration - blank - QLD
        • Item icon Statutory declaration - blank - TAS
        • Item icon Statutory declaration - blank - SA
        • Item icon Statutory declaration - blank - WA
        • Item icon Statutory declaration - blank - NT
        • Item icon Standard annexure note for documents
      • Item icon Standard annexure note for documents
  • Folder icon B. The payment claim
    • Item icon The payment claim
      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, or the related goods and services were first supplied, under the contract and on and from the last day of each subsequent named month: s 13(1A). However, if the ...

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    • Folder icon If required - Supporting statement
      • Item icon Supporting Statement - Construction Contracts - NSW Fair Trading
    • Item icon Preparing a payment claim
      The Act requires that a payment claim identify the construction work, or related goods and services, to which the progress payment relates, indicate the amount of the progress payment due, and state that it is made under the Act: s 13. Principals must pay amounts due under a construction ...

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    • Item icon Letter of demand incorporating payment claim
    • Item icon Service of payment claim
      A claimant entitled to a progress payment must serve the payment claim on the respondent (being the legal entity with whom they contracted and who is liable to make the payment) in accordance with the approved methods of service set out in s 31. Unless the contract provides for a longer ...

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  • Folder icon C. Following service of the payment claim
    • Item icon Where respondent pays the amount claimed
      The due date for payment is determined in accordance with the terms of the contract. However the contract cannot stipulate a due date later than the due dates for payment set out under s 11(1A) and (1B). For example, if the contract states that payment is due 14 days after invoice then, upon ...

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    • Item icon Where respondent disputes claim and provides a payment schedule
      Where the respondent disputes the payment claim, they must prepare a payment schedule and serve it on the claimant: s 14. The respondent has 10 business days after the date of service of the payment claim, or a shorter period provided in the contract, to serve a payment schedule on the ...

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    • Item icon Example - Payment schedule
    • Item icon Service of payment schedule
      Usually, a payment schedule is served by post addressed to the claimant’s ordinary place of business during business hours. Evidence of service, such as an express post tracking number, must be retained as proof of service. The payment schedule must be served on the claimant in accordance with ...

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    • Item icon Respondent pays only part of the amount or does nothing
      The consequences of failing to provide a schedule or failing to make all payments in a schedule are treated separately in s 15 and s 16. Note s 14(4) is above. Section 15(1) and (2) provides:

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    • Item icon Respondent fails to pay the whole or any part of the scheduled amount
      Where part payment is made, the claimed amount is to be reduced by the amount of the payment received. If full payment is not made by the due date, the claimant can, after service of a second chance notice – see Time for making an adjudication application below – apply for adjudication of the ...

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    • Item icon Second chance notice
      Section 17(2) notice – Second chance for respondent to provide payment schedule This provides the respondent with a second opportunity to provide the claimant with a payment schedule, however within the shorter period of 5 business days. See the matter plan for an example s 17(2) notice.

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    • Item icon Section 17(2) second chance notice
    • Item icon Letter of demand - No payment schedule received
    • Item icon Letter of demand - Scheduled amount not paid in time
    • Item icon Statement of liquidated claim
    • Item icon Example content - Statement of liquidated claim - No payment schedule received
    • Item icon Example content - Statement of liquidated claim - Scheduled amount not paid in time
    • Folder icon If required - Suspending work or supply of goods
      • Item icon Damages or losses incurred as a result of suspension
        If the claimant, in exercising the right to suspend, incurs loss or expense as a result of the respondent withdrawing any part of the work or supply under the contract, the respondent is liable to pay the claimant this amount. The claimant will not be liable for any loss or damage suffered by the ...

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      • Item icon Notice to suspend work - No payment schedule received
      • Item icon Notice to suspend work - Scheduled amount not paid in time
  • Folder icon D. If required - Adjudication
    • Item icon Adjudication
      Adjudication is a statutory function carried out by independent adjudicators; and is often preferred to court-based debt recovery, which, as outlined above, is available as an alternative means of recourse under s 15 and s 16. The maximum liability of an unsuccessful claimant is the ...

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    • Item icon Time for making an adjudication application
      Section 17(1) proves that a claimant may apply for adjudication of a payment claim if:

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    • Item icon Adjudication application – Adjudicate Today
    • Folder icon If required - Payment withholding request
      • Item icon Payment withholding request
        Section 26A of the Act allows for a claimant who has made an adjudication application to require a principal contractor to retain sufficient money to cover the claim out of money that is or becomes payable by the principal contractor to the respondent. The claimant is required to serve on the ...

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      • Item icon Payment withholding request – Adjudicate Today
      • Item icon Letter to principal contractor enclosing payment withholding request
      • Item icon Statutory declaration - blank - NSW
      • Item icon Clause - Statutory declaration to accompany payment withholding request
    • Item icon Adjudication response
      Where the respondent had provided a valid payment schedule, they may lodge with the adjudicator a response to the claimant’s adjudication application within 5 business days from receiving a copy of the adjudication application or 2 business days after receiving notice of an adjudicator’s acceptance ...

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    • Folder icon If required - Acting for respondent
      • Item icon Respondent’s adjudication response - Adjudicate Today
    • Item icon Adjudicator’s determination
      The adjudicator has 10 business days to determine the amount to be paid from after the date on which the respondent lodges the response, if the respondent is entitled to lodge an adjudication response under s 20; or, if a response is not lodged, the end of the period within which the ...

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    • Item icon Letter to respondent following adjudication
    • Item icon Letter to principal contractor serving copy of adjudicator's determination
    • Item icon Notice to suspend work - Adjudicated amount not paid in time
  • Folder icon E. If required - Filing adjudication certificate as a judgment debt
    • Item icon Filing an adjudication certificate as a judgment debt
      Consequences of not paying claimant adjudicated amount Section 24 of the Act sets out the conditions under which an adjudication certificate may be issued.

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    • Item icon Letter to adjudicator requesting adjudication certificate
    • Item icon Registration or filing of certificate of judgment or order
    • Item icon Affidavit
    • Item icon Affidavit of debt
    • Item icon Clause - Affidavit of debt
    • Item icon Notice to suspend work - Adjudicated amount not paid in time
    • Folder icon If required - Contractors Debt Act
      • Item icon Contractors Debts Act
        If the circumstances suggest that recovery of the judgment debt might be difficult, the claimant should consider running the recovery procedure under the Contractors Debts Act 1997 concurrently with their security of payments claim. This process can however increase legal costs, as separate ...

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      • Item icon Debt certificate
      • Item icon Notice of details of principal
      • Item icon Letter to principal contractor enclosing notice of claim
      • Item icon Notice of claim
      • Item icon Discharge notice
      • Item icon Attachment order
  • Folder icon F. Finalising the matter
    • Folder icon If required - Enforcement
      • Item icon Letter to client explaining enforcement procedure
    • Item icon Finalising the matter
      Once the adjudication certificate is registered as a judgment, the payment process under the Act is complete. If the respondent fails to pay the judgment debt in time, you will need to advise your client on the most appropriate methods of enforcement of the judgment debt including under the ...

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    • Item icon Letter to client finalising the matter
    • Item icon Example invoice incorporating notification of client's rights - NSW
    • Item icon Invoice recital - Security of payments NSW
    • Item icon Closing the file
    • Item icon File closing checklist
  • Item icon Comments and suggestions for By Lawyers

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