If you are a contractor that operates a couple rungs down the contractual chain, almost invariably you’ve experienced non-payment of an invoice. In the building industry cashflow can be difficult, especially at the end of a project. Even a contractor successfully wins an Adjudication, enforcement against a Respondent can be tricky, especially if you are uncertain the Respondent will be paid by their Principal.
So, what do you do? Go above their head!
Under the section 26A Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) you can require a Principal to retain the amount claimed by you once they have lodged Adjudication Application.
The effect is that the Respondent to the Adjudication does not receive payment from the Principal and this money is to be retained by the Principal until any of the following occurs:
- The application is withdrawn;
- The Respondent pays the amount claimed;
- The Claimant serves a notice of claim under the Contractors Debts Act 1997 (NSW); or
- 20 days after the Determination is served on the Principal contractor/Principal.
If the Principal does not retain the amount claimed as required, they will become liable to pay the Claimant (you) the claimed amount, which the Principal can then claim form the Respondent.
At the completion of the adjudication process, the Claimant must provide the Principal with a copy of the Adjudication Certificate. If they fail to do so, they will be liable for a penalty, in addition to the amount payable.
This process ties into section 6 of the Contractors Debts Act 1997 NSW (CDA), which has always allowed an unpaid contractor to issue a Notice of Claim, which assigns the obligation of the Principal to pay the money owed under the contract to the Respondent higher up the contractual chain, as long as the debt has been established in some way. The Principal must pay the Claimant within 7 days of this notice and an Adjudication Certificate is sufficient to activate this right under the CDA.
Payment Withholding Requests are a powerful mechanism that encourages settlement of the disputes and contractor cashflows. Due to the urgent nature of these requests, potential Claimants must be aware of their obligations and timing restraints in relation to payment withholding requests.
If you are making Payment Claims under the Act and or considering referring a payment issue to Adjudication and would like further information about Payment Withholding Requests, contact:
Lawyer, Nexus Law Group
+612 9016 0141
Principal, Nexus Law Group
+612 4961 0002
This publication is © Nexus Law Group and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.