Security of Payments
An easy to follow and practical guide facilitating the quick and efficient recovery of outstanding payments for clients within the building and construction industry.
The guide includes informative commentary on the relevant issues and precedents for each step of 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.
Recent updates can be viewed on Obiter - our News & Updates site.
MATTER PLAN
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“ Contents Overview2 ”
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“ In the legal profession the term ‘costs’ refers to the fees and other expenses a solicitor charges a client for their professional services and other payments that arise out of the provision of legal services, including disbursements such as court fees. Costs are one of the most heavily regulated ... ”
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“ Disclosure requirements vary between the states and territories and are embodied in each costs agreement. Law practices are required to make written disclosure of a wide range of matters relating to the costs of legal services before or as soon as practicable after the law practice is retained. ”
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“ Costs disclosure is not required in relation to certain clients, described in the legislation as ‘sophisticated clients’ or ‘government or commercial clients’ as defined by the relevant legislation to include clients such as lawyers, law firms, public companies, liquidators and government entities. ... ”
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“ Cost agreements are not always required although clearly as between the practitioner and their client there will be disclosure but without the need for formal compliance with the regulation. The limits are: ”
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“ In NSW & VIC there is a standard costs disclosure for fees under $3,000 which is included in the precedents. If the total legal costs in a matter (excluding GST and disbursements) are not likely to exceed $3,000 (the higher threshold), a law practice may, instead of making a disclosure under ... ”
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“ Knowing that clients are disinclined to read, sign and return cost agreements, the letter sending them usually provides that unless heard to the contrary the practice will assume agreement. There will almost always be a later opportunity to have the agreement signed. Of course, many practitioners ... ”
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“ Costs are remuneration for professional work when acting in the capacity of a barrister or solicitor. Payments to a practitioner for work which is not professional work, are not costs. Disbursements are payments made, or liabilities incurred in the course of practice and which the practitioner is ... ”
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“ Firms are required to provide an estimate of the total of costs, excluding GST and disbursements, and information on the impact of any significant change to these costs. A law practice must take all reasonable steps to satisfy itself that the client has understood and consented to the proposed ... ”
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“ What is a disbursement Disbursements are payments made, or liabilities incurred in the course of practice, and which the practitioner is bound to pay whether put in funds by the client or not; or payments which, by established custom and practice of the profession, the practitioner is bound to pay. ... ”
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“ A lawyer may request money on account of fees be paid into a trust account before the commencement of work. This is particularly so in criminal and other court matters where the inclination to pay may wane with an unwanted outcome. The funds may cover legal fees as well as disbursements and the ... ”
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“ The costs agreement will set out the billing cycle. Commonly a regular monthly billing cycle is adopted covering work undertaken during the previous month. ”
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“ A lump sum invoice is one which sets out a recital describing the legal service provided and a total amount. An itemised invoice is one which sets out in detail each of the legal services provided, the date they were provided, and the cost for each service. An itemised invoice allows for an invoice ... ”
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“ A law practice cannot charge for the time spent in preparing an invoice. A law practice cannot charge for the time spent in preparing an itemised invoice for a client who has already received a lump sum invoice. ”
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“ All bills should be accompanied by a written statement setting out the avenues that are open to the client in the event of a dispute and any time limits that apply to the taking of such action. Under the uniform law in NSW and VIC each bill or covering letter must be signed by a principal of the ... ”
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“ In 1991 the Australian Competition and Consumer Commission released guidelines to assist businesses in the withdrawal on one and two cent pieces. In the purchase of goods or services for cash, businesses were advised to round the final payment: ”
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“ – When to charge and how to charge Goods and Services Tax (GST) is a broad-based tax of 10% applied to most goods and services, including legal services. Businesses are required to register for GST if their turnover exceeds the $75,000 threshold. If turnover is less than $75,000 than registration ... ”
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“ Reducing fees can create good will but needs to be handled with care as some take offence to the implication that they cannot afford to pay for the work they have retained. It is also a hard won reality that comes from experience that people are inclined not to value any advice given for free. ”
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“ Credit terms are quite common and need to be clearly documented and administered. ”
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“ Notification of rights is a requirement in all states and is found in all example invoice precedents. If the client has not been advised of their rights in a costs agreement, then practitioners must advise the client of their rights at the time of issuing the invoice. ”
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“ Monthly accounting for work in progress is recommended in order to achieve target lockup days. If debtors are not followed up promptly cash flow reduces making it imperative to adopt a debtor’s policy for effective debtor control. All overdue accounts must be followed up promptly and repeatedly. ”
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“ Termination When a retainer is terminated before completion a lawyer may claim costs for the work done to the date of termination on a quantum meruit basis if: ”
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“ Sound financial management is absolutely critical to the success of the law practice. There is a high correlation between practices with poor financial management and increased probability of experiencing professional negligence claims. The link is clear. Principals, who do not manage their ... ”
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“ Methods of payment include: Credit card; ”
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“ All By Lawyers cost agreements include the following authority to transfer money to pay their invoices: Trust money ”
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“ Lawcover recommends that practitioners use the cost assessment scheme to recover costs. Instituting proceedings against a disgruntled client who refuses to pay an outstanding bill exposes practitioners to the risk of a cross-claim in negligence being filed. The advantage of the cost assessment ... ”
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“ Other states For more information on similar procedures that exist in some other states, see: ”
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“ Online Registry NSW Supreme, District and Local Courts NSW Government ProcurePoint news on Security of Payment ”
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“ District Court Civil (NSW) guide Local Court Civil (NSW) guide ”
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“ 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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“ Taking good instructions When receiving instructions from the client, the use of the precedent Retainer Instructions is a very useful risk management tool. It prevents overlooking important issues and records instructions which cannot be contradicted later. ”
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“ 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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“ As previously stated s 5 provides extensive examples of ‘construction work’ and ‘supply of related goods and services’, including the following: all building work such as brick laying, foundation work, carpentry and electrical; ”
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“ 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. Instead, the ... ”
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“ 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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“ 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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“ 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 contract ... ”
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“ 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 period, the ... ”
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“ 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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“ 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 claimant. ... ”
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“ 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 s 31 ... ”
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“ 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: 15CONSEQUENCES OF NOT PAYING CLAIMANT WHERE NO PAYMENT SCHEDULE ”
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“ Where part payment is made, the claimed amount is to be reduced by the amount of the payment received. ”
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“ 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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“ 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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“ 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 amount of the ... ”
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“ Section 17(1) proves that a claimant may apply for adjudication of a payment claim if: (a)the respondent provides a payment schedule under Division 1 but: ”
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“ 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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“ 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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“ 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 respondent was ... ”
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“ 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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“ 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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“ 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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