How can Security of Payment Legislation assist debt collection under a building contract or sub-contract?

Is this a building/construction matter?

If the debt involves a progress claim under a building contract or sub-contract for the supply of goods or services in the building industry, then you will have the option to invoke the relevant state/territories Security of Payment Statutory Scheme.

Security of Payment refers to any system designed to ensure that contractors + sub-contractors in the building industry are paid even in case of dispute.

This can involve a system of progress payments, interim arbitration decisions, or a system which legally requires a company to pay an invoice within a set number of days, regardless of whether the company believes they are accurate.

Background to the Security of Payment Legislation

Security of Payment legislation has been introduced by each Australian State and Territory to allow for the rapid determination of progress claims under building contracts or sub-contracts and contracts for the supply of goods or services in the building industry.

This process, which establishes adjudication as the primary dispute resolution mechanism, was designed to ensure cash flow to businesses in the construction industry, without the parties getting tied up in lengthy and expensive litigation or arbitration.

In addition to quick payment, the scheme also allows for Security of Payment to be provided in stages or payment schedule.

Common method used to invoke the operation of the Security of Payment Statutory Scheme

The relevant State/Territory Security of Payment Statutory Scheme can be invoked by including the following words of your invoice.

"This is a payment claim made pursuant to the Building and Construction Industry (Security of Payment) Act 2009 (ACT)”; or
"This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 NSW".
These Statements may vary depending in which State/Territory the Claim is made......".

These statements have not been a requirement in NSW since legislative amendments made in 2013.

Advantages

✅ Secures Rapid Payment;

✅ Adjudication is Quicker + Less Expensive than Court;

Disadvantages

❌ Potential for Power Imbalance;

❌ Confusion + Poor Understanding;

❌ Costliness of Dispute Resolution.

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.