1. Security of Payment workshop Andrew Robertson Important Disclaimer: The material contained in this publication is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. 26038040

2. Executive summary Building and Construction Industry Security of Payment Act 2009 (SA) Contractor makes a claim Payment >if no response can take immediate steps >if not happy with response can pursue payment elsewhere - adjudication Adjudication >quick resolution of amount

3. Status? Act obtained Royal Assent on 10 December 2009 No commencement date yet Expected to commence 10 December 2011 Regulations needed >Create the practical mechanisms needed for the Act to work >Some regulations released 1 December 2011 >Further material needed Every other State/Territory has had equivalent legislations for 2-8 years

4. Object and Application Object >recovery of progress payments Application >any construction work or the supply of related goods and services >works/services carried out in South Australia >binds Crown

5. Exemptions Does not apply to: >extraction of minerals >drilling for oil or natural gas >residential building work (where party resides) >employment/ loan/ insurance/ guarantees/ indemnities >where payment is other than on value of work >regulations

6. Payment steps Process >Payment Claim >Payment Schedule >Adjudication Process >Adjudication Determination and Certificate / Judgment Debt

7. Payment claim How to get paid under the Act >entitlement to claim progress payments >service of a Payment Claim What is a Payment Claim? >in writing >clearly sets out the type of work, goods and/or services to which it relates >clearly sets out the amount of the claim >must state that it is made in accordance with the Act

8. Payment claim What items can be claimed? >construction work >goods and services, for example, labour, architects, surveying What items cannot be claimed? >superannuation >employee wages

9. Payment claim How is a Payment Claim delivered? >by delivering it to the recipient personally >delivery to place of business within office hours >post or fax to ordinary place of business >in any other manner provided for by your contracts How long do you have to deliver a Payment Claim? >6 months after work to which claim relates is completed >longer period if contract so provides

10. Payment Schedule What do you do if you are served with a Payment Claim? >if the progress payment is acceptable, you pay on the claim >if you dispute the amount in the Payment Claim, it is critical that you prepare and deliver to the claimant a Payment Schedule

11. Payment Schedule What must a Payment Schedule contain? >identify the Payment Claim to which it relates >set out what amount of the payment you propose to make, ie, “Scheduled Amount” >detailed reasons if the Scheduled Amount is less than the amount of the Payment Claim >detailed reasons for withholding payments

12. Payment Schedule Who may issue a Payment Schedule? >The Respondent and its representatives, including the Superintendent How is a Payment Schedule delivered? >same way a Payment Claim is to be delivered

13. Payment Schedule How long do I have to deliver a Payment Schedule? >15 business days >any earlier time provided by your contract What happens if you do nothing? >you become liable to pay the Payment Claim in full

14. Payment Schedule Options for claimant if respondent does not pay or does not deliver a Payment Schedule >recover the money as a debt in either the Magistrates, District or Supreme Courts >make an Adjudication Application >give notice of intention to suspend work under the contract

15. Adjudication Process: >Application for adjudication >Appointment of adjudicator >Adjudication Response >Determination >Adjudication Certificate and Judgment Debt

16. Enforcement option (winding up or examination notices) Scheduled Amount must be paid by the contractual due date for payment, otherwise, within 15 business days of the Payment Claim (s11(1)(6)) Payment within 5 days of determination unless later time as determined by Adjudicator Issue Payment Claim whenever a contractual entitlement to make a progress claim arises, otherwise on the last day of the month (reference date) (s13) 2 days notice of intention to suspend works before suspending (15(2)(b)) Failure to Issue a Payment Schedule within 15 days of Payment Claim (or less if contractually required) Payment Schedule Issued indicating Schedule Amount which is approved for payment and providing reasons as to why Scheduled Amount may be less than the Claimed Amount must be issued within 15 days of Payment Claim (or less if contractually required) Full payment is made prior to expiry of period in which a Payment Schedule can be issued or Adjudicator Accepts Appointment within 4 days of Adjudication Application being made (or failing acceptance, a new Adjudication Application can be made within 5 days of expiry of the 4 day period of accepting first application) Adjudication Response not permitted Adjudicator determines Adjudicated Amount, due date for payment and applicable rate of interest within 10 days of accepting appointment to act as Adjudicator, unless the parties agree to extend the time for determination (common in lawyer adjudications) Recover as debt due in Court. The respondent becomes liable to pay the claimed amount on the due date for the progress payment (s14(4)) S15 15(2)(a)(i) Notice of intention to Apply for Adjudication giving further 5 days (2 nd chance) to issue a Payment Schedule to be given within 20 days of expiry of due date for payment 15(2)(a)(ii)+17(2)(a) Failure to issue a Payment Schedule within 5 days of Notice Adjudication Application made within 15 days of expiry of 5 day 2 nd chance s17(1)(b) Payment Schedule Issued within 5 days of Notice s17(2)(b) Schedule if less than Claimed Amount Amount for approved part of Claimed Amount Adjudication Application made to determine entitlement to balance, within 15 days of receiving Payment Schedule 17(1)(a)(ii) Adjudication Application made within 20 days of expiry of due date for payment Recover as a debt due in Court 2 days notice of intention to suspend works before suspending Adjudication Response within the later expiring of 5 days of Adjudication Application being made, or 2 days of notice of Adjudicator's appointment Failure to pay Adjudicated Amount Claimant's Respondent's Adjudicator's steps steps steps Request Adjudication Certificate and give 2 days notice of intention to suspend works File Adjudication Certificate as judgment for unpaid amount in Court PAYMENT or References to days in this flowchart are references to business days. This flowchart demonstrates the payment mechanism set down by the Act and should not be construed as legal advice. Failure to pay Schedule Amount by the due date for payment

17. Contractual Issues No option to contract out of Act “pay when paid” provisions are void Time frames >reference date >when payments become due and payable >issuing of payment schedule >consequences of not paying Amount of progress payment and value of work Serving claims

18. Practical tips Review your contracts to ensure they place you in the best possible position Have a system in place to identify when mail is received Check if the Payment Claim and Adjudication Application comply with the requirements of the Act Very short time frames – always check and respond on time List reasons in Payment Schedule If unsure, seek advice