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What work does Security of Payments apply to?
Security of Payments legislation, applies to both building work or construction work, and the supply of building work or construction work related goods and services. So it applies to bricklaying as it does to architectural services. As a rule of thumb, any time you do work on a structure that is ‘fixed in the ground’ this would qualify as construction work.

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What is ‘Building Work or Construction Work’ under the Security of Payment Act?
The best answer to that is to show you what the Act actually says. According to the Act it is:
  • 1. In this Act, construction work means any of the following work—
  • (a) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not);
  • (b) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, power lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for the purposes of land drainage or coast protection;
  • (c) the installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, air conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems;
  • (d) the external or internal cleaning of buildings, structures or works, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension;
  • (e) any operation which forms an integral part of, or is preparatory to or is for rendering complete, work of the kind referred to in paragraph (a), (b) or (c), including—
    • i) site clearance, earth moving, excavation, tunnelling and boring; and
    • ii) the laying of foundations; and
    • iii) the erection, maintenance or dismantling of scaffolding; and
    • iv) the prefabrication of components to form part of any building, structure or works, whether carried out on site or off site; and
    • v) site restoration, landscaping and the provision of roadways and other access works;
  • (f) the painting or decorating of the internal or external surfaces of any building, structure or works;
  • (g) any other work of a kind prescribed for the purposes of this subsection.
  • 2. Despite subsection (1), construction work does not include any of the following work—
  • (a) the drilling for, or extraction of, oil or natural gas;
  • (b) the extraction (whether by underground or surface working) of minerals, including tunnelling or boring, or constructing underground works, for that purpose;
  • (c) any other work of a kind prescribed for the purposes of this subsection.

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What are ‘Building or Construction - Related Goods and Services’ under the Security of Payment Act?
The best answer to that is to show you what the Act actually says. According to the Act ‘Related Goods and Services’ is:
  • 1. (a) goods of the following kind—
    •   (i) materials and components to form part of any building, structure or work arising from construction work;
    •   (ii) plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work;
  •     (b) services of the following kind—
    •   (i) the provision of labour to carry out construction work;
    •   (ii) architectural, design, surveying or quantity surveying services in relation to construction work;
    •   (iii) building, engineering, interior or exterior decoration or landscape advisory or technical services in relation to construction work;
  •     (c) goods and services of a kind prescribed for the purposes of this subsection.

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Can Security of Payments really get me my money?
Most of the time it does. It would be a mistake to think that this Act has the power to recover money all the time, every time. Other factors come into it like the ability of your debtor to pay, your ability to enforce a determination, and the level of knowledge you have of your debtor. If you don’t know where you debtor is, who they bank with, or how to contact them, it will be hard to enforce and get your money. But Security of Payments gives a claimant great leverage to recover money which did not previously exist, and it remains your lowest cost ‘biggest bang for your buck’ option.

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What should a Payment Claim contain?
  • 1) You need to state clearly the GST Inclusive Amount you are claiming.
  • 2) You need to state that the Claim is made under the Security of Payments Act. So insert clearly somewhere: "This is a Payment Claim made under the Building and Construction Industry Security of Payment Act 2002". And
  • 3) you must indicate the work you are claiming for. That means your need to supply some detail as to what you are claiming and how the claimed amount is arrived at. Also include variations sheets, timesheets, and other relevant documentation that relate to your claimed amount. Remember that you can only claim for work done up to the reference date.

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Does a Payment Claim need to contain State Decs, insurance details, and that other stuff?
No. A payment claim need only contain what the Act requires it to contain. The claim is valid despite not including all the crap so many contracts require.

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When do I serve the Payment Claim?
If you are working under a contract that nominates a day for submitting claims, then serve it on or after that date e.g the 25th of each month. This date is the reference date under the Act so only claim for work done up to that date.

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What is a reference date?
This is the date up to which you can claim. So if your contract states that you must submit claims on the 25th of each month, then you can only include in your claim for work done up to and including that date. Even if you submit late (say on the 30th) you cannot claim for work done after the 25th. That can be claimed in the next month.

If your contract does not specify a reference date, then the Act states that it is;

  • 1.   In the case of the first reference date – 20 business days after work was first carried out. Each 20th business day thereafter is also a reference date, except that:
  • 2.   In the case of a single of one-off payment – the day after work was last carried out
  • 3.   In the case of a final payment – the day after the last day of the defects liability period (if applicable) or
  • 4.   The day after the issue of a certificate specifying the final amount payable or
  • 5.   If neither the above applies – the day after the work was last carried out.


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How do I serve a Payment Claim?
Strictly speaking you can serve it via post, fax, and hand-delivery. But to avoid denial of service the BEST ways are fax (so long as your fax machine produces a transmission report) and courier (so long as the courier service gets a "proof of delivery signature). Post is no good as someone can always say they never got it. Registered Post tends to never get collected. (When you owe money in construction registered post is NEVER good news). Also email is no good. You cannot prove that the intended recipient ever got the claim.

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When is it too late to serve a Payment Claim?
Generally if more than 3 months has passed since you last carried out work under the construction contract. This includes return visits to fix or adjust work, or to rectify and/or maintain anything in relation to the work. The Act has many qualifications on this issue so seek advice or ask the Guru as regards your specific project details.

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After I serve the payment claim, what happens next?
You must give the debtor (Respondent) 10 business days to send you back a Payment Schedule. ‘Business days’ are any days that aren’t weekends or public/statutory holidays. Remember that day ‘one’ is the next business day AFTER receiving the Schedule.

Also realise that a Payment Schedule doesn’t have to have the title ‘Payment Schedule’. It only needs to a) refer to the payment claim, b) nominate an amount to be paid [scheduled amount] – even if its $0.00, and supply reasons why the scheduled amount is less than the claimed amount.

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OK so I received a Payment Schedule within 10 business days. Now what?
You can now take the matter to adjudication. You must have the adjudication application lodged for adjudication within 10 business days of receiving the Payment Schedule. Remember that day ‘one’ is the next business day AFTER receiving the Schedule.

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I served the claim but didn’t get any response at all within 10 business days. What happens now?
You need to give the Respondent a final opportunity to send you a Payment Schedule. This is done by serving them with a section 18(2) Notice. This notice does two things: it advises the Respondent that you are taking the matter to adjudication, and it advises that they have 2 business days in which to send you a Payment Schedule.

After the 2 business days have expired, you then 5 business days in which to lodge an adjudication application.

Remember, you can only send this Notice within 10 business days after the due date for payment of the claimed amount has expired. This is vital. If you serve this Notice early or late it will be invalid and you cannot lodge an adjudication application.

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What if I served the Payment Claim ages ago, but did nothing about it?
You will have to start again, provided that you carried out more work after serving that claim, and provided you last carried out work within the last 3 months. If you served a payment claim which was a final claim, did not do any more work, and did not take the matter to adjudication, then you cannot serve the claim again unless you have not been paid.

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What needs to be in an Security of Payment Adjudication Application?
The most important thing is your written arguments as to why the debtor’s (Respondent’s) reasons for non payment are incorrect. To this you have to supply documentary evidence that support your arguments and disprove the Respondent’s reasons. If your Respondent has not provided a Payment Schedule, then you still have to outline the work done and the basis of your claimed amount.

You must also include copies of the contract, payment claim, Payment Schedule, and s.18(2) Notice if applicable. Keep everything indexed for easy reference.

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What makes for good evidence to support my application?
Contemporaneous documents such as timesheets, variations forms, site diary notes, email exchanges, and invoices are all excellent evidence to show the nature of the dispute and the position of each side. The next standard of evidence is work-related documents such as the contract, plans, technical drawings, technical standards, and Notices served under the contract. All these can be advanced to support your arguments relating to the claim. The less oral arrangements you have, the better!

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What does the adjudicator do?
The adjudicator will carefully review the claim and the arguments in support of it. The adjudicator will also review the Respondent’s arguments and evidence and will then balance the Claimant’s argument and evidence against the Respondent’s. The adjudicator’s decision will be an outcome of this process. Because there is no hearing or cross-examination the adjudicator will make the most just determination based on the documentation before him/her. The reasons will be provided to both parties in writing.

You must also realise that adjudicator s charge a fee for their time, which must be paid before the determination is released.

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Who are the adjudicators?
Some of them are lawyers, but in the main they are people who have had long experience in the construction industry as project managers, engineers, Quantity Surveyors, or contract administrators. You will never get to see or meet the adjudicator of your matter. The communication with the adjudicator will handled via the Nominating Authority.

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What do people fight about?
A majority of disputes are over the value and entitlement to variation work, and whether the work is a variation or is ‘within scope’. The next biggie is defects and set offs. It is rare that disputes involve complex matters of law. The majority of disputes are resolved by regard to the scope, site documentation and records, drawings and revisions, and the conduct of the parties. Questions like ‘Was the variation requested? and ‘Is the mechanical work in revision E additional to that in the tender’s Revision C?’ are typical of matters to be decided.

This is straight-forward stuff and balanced decisions can be made with regard to the documents around the work.

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Where do I send my Security of Payment adjudication application?
You need to send your application to a Nominating Authority or ‘ANA’ for short. These authorities are appointed by the state government to receive, process, and manage the adjudication process. They are the ‘middle man’ between the Claimant, Respondent, and the adjudicator. For a list of ANA’s in your state click here.

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What does adjudication cost?
This will really depend on the complexity of your dispute. In our experience over 90% of determinations will come in under $3000.00 and many under $2000.00. It is rare in our experience to have a determination cost over $10 000.00 and then it would normally be a dispute over six or seven figures. Whichever side is mostly or entirely successful will usually be able to recover the cost of the adjudication. It is still cheaper than court which can cost you $50 000 on even a minor matter.

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How long do I tolerate underpayment or non-payment before taking the matter to adjudication?
There are two elements to this one. The first relates to your cashflow: how long can you continue on the meager cash your client is paying? The second is more important; conditioning. Once your client gets used to the fact that you keep working despite the fact that he is underpaying you, it makes it that much harder to reverse this ‘habit’. Have the fight early. I would not go more than 2 progress claims in a row before going to adjudication.

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Why is it good to get a professional adjudication application done?
You will find that your debtor will often have a law firm prepare submissions such as the Payment Schedule, on their behalf. These can run to 3 folders of submissions. There has also much refining of the application of the Act given the caselaw. You need to be aware of these, or use someone who is up to speed. Also consider if you can spare the time away form your business to deal with the case.

The biggest Payment Schedule we have dealt with was over 1300 pages long. Of course 1282 pages of it was irrelevant crap. But it still pays to have someone who knows how to navigate these waters, prepare submissions for you.

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What do I do if payment starts to become a problem?
The key thing is not to pretend it doesn’t exist. Too many contractors keep their head down and don’t want to rock the boat because they think that keeping quiet is the best way to get paid. Wrong wrong wrong.

Depending on the contract and the circumstances there are many things you can do, or threaten to do, when payment problems start. They key strategy is to bring the problem to a head quickly and deal with it. You can do this several ways; suspend work, issue a notice of dispute, call for a meeting, get your lawyer to write a letter setting out the issues, run a claim under security of payments. You need to go hard early.

Don’t think payment problems go away with time. They don’t. The longer you work the deeper you will go into debt, and the less money you have to fight.

Get advice, and do something.

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How do I suspend work under the Security of Payment Act?
You have to issue a ‘Notice of Intention to Suspend’ under the Security of Payment Act in your state. The main thing is to know when you can issue this Notice. That is a) when you have served a Payment Claim and after 10 business days you have not received a Payment Schedule AND have not been paid the full claimed amount by the due date, and b) when your client has issued you with a Payment Schedule with a scheduled amount to be paid, and then does not pay it by the due date, and c) when an adjudicator has determined an amount in your favour and your client does not pay you the amount by the due date.

In all those circumstances you can suspend work. But you MUST be sure that the claim is well prepared and valid, and that the Notice of Suspension is in the correct form. Once the Notice is issued you must keep working for two more business days. If your client pays you must recommence work within 3 business days.

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If an adjudicator finds an amount in my favour, when do I get paid?
Generally the adjudicated amount must be paid within 5 business days of receipt of the determination. So if the determination is received by your debtor on a Wednesday, the payment will be due on the following Wednesday. If the due date for payment is defined in the contract, and at the time of the determination, that date has not yet been reached, then the adjudicator will determine that that date is the due date for payment.

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What if I don’t get paid…. then what?
You can then enforce the decision in court. First you will need to get an Adjudication Certificate. The Nominating Authority that handled the adjudication application will issue a certificate which is a formal document ‘certifying’ that the amount is payable to you. You can only apply for this certificate after the due date for payment has passed.

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What options do I have to enforce the judgment amount?
You have the same options that anyone else has when they win an amount in their favour in a court case. You can garnish the money from their bank account, send the sheriff around to seize property (including land) and auction it off and pay you from the proceeds, or issue a Creditor’s Statutory Demand and threaten to wind the company up. You can also agree to have your debtor pay you in installments via an Installment Order via the courts.

The difference is that you have these options available to you via the Security of Payments process which is much faster and less costly than a full blown court case.

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How many adjudications are done in my state each year?
Each state keeps detailed statistics on how many adjudication applications occur each year. In Victoria there are less than 100 so far, but this will grow as contractors become more familiar with it.

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How long does it take from serving my claim to getting a decision?
This will vary depending on how fast each party fulfils its part of the process. Having said that, a typical period is about 5-6 weeks.

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Is adjudication done at a hearing where we argue our case in front of the adjudicator?
No. The entire process is done on written submissions. Once the application is in there is nothing to do but wait for the determination. The adjudicator has 10 business days after accepting the nomination to get a written decision back to the Nominating Authority for distribution to the parties.

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Do I get to talk to or meet the adjudicator?
No. You only communicate with the Nominating Authority who is the ‘middle man’ between you and the adjudicator.

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My client has offered to repay me in installments....what do I do?
This caper very rarely works. Most of the time you will get the first one or two payments and then nothing. The best way to handle this is to get a judgment debt in your favour (which will require a determination under Security of Payments or sued through the courts) and then have your debtor file an ‘Application to Pay by Installments’ with the court. The registrar will decide on the monthly amount to be paid. At this point you cannot enforce the debt in any other way. But if your debtor misses one payment, all best are off and you can enforce the debt again. The important thing here is to understand that in this scenario your debtor is in an agreement with the court, not you. This makes it a little harder to ignore.

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My client has asked for a meeting after they got a copy of the adjudication application… should I meet?
Yes. Always agree to meet and keep talking. You may resolve the issue and you can then withdraw the application at little or no expense. But if that does not happen, you can always get useful information about how your debtor is thinking and what they might do. Meetings tell you a lot… not only by what your debtor is saying, but what their body language is saying and the ‘vibe’ you get from them. It’s good to get as much of this kind of information as possible.

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My client might call me after he gets the claim – what do I say?
As little as possible. Simply say that ‘I am claiming what I believe you owe me’. Your client will then argue as to why they owe you nothing. Listen politely and say that clearly there is a difference of opinion.

Do NOT make threats, and do not give away anything you intend to do, and DO NOT talk about how you’re going to get an adjudicator to decide. Forewarned is forearmed. Just pull out the poker face and play a straight bat.

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When is it too late to serve a Payment Claim?
Generally if more than 3 months has passed since the last reference date, it is too late. Remember the 3 month period starts from the reference date.

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