Beware The Unwanted Christmas Present - Building And Construction Industry Security Of Payment Act Claims

Christmas is almost here again and most people will be looking forward to enjoying a well earned break. Many offices will be closing for the year on Friday and some will not re-open until well into January. In particular, the building and construction industry traditionally enjoys a lengthy shut down period during which tools are downed and hands stretch out for a few cold drinks until works resume.

Unfortunately for some, one thing that does not take much time off over Christmas is the Building and Construction Industry Security of Payment Act (the Act). Apart from public holidays, weekends and the days between Christmas and New Year, the time for providing payment schedules and adjudication responses under the Act continues to run.

For example, if your office were to close on 19 December 2008 and you are served with a payment claim under the Act the following day, the 10 business days to provide a payment schedule in response would expire on Monday, 12 January 2009. Many people may only be returning to the office that day. Being served late in December with an adjudication application would be worse yet, as the Act only allows 5 business days for lodging a response.

It is worth remembering that the Act remained relatively unused until the 2003 decision of Walter Construction Group v CPL (Surry Hills), where the developer was found liable for almost $14 million after failing to respond in time to a claim served on 20 December 2002. Failing to provide a response in time can you leave you liable under the Act to pay the entire amount of the claim, whether that amount is payable under the contract or not. You obviously don't want to be caught in that trap. It also appears that the number of claims being made under the Act has significantly increased over the last 3 months, as people start chasing outstanding money harder.

For this reason it is important to have a procedure to check for incoming correspondence over the Christmas period. Under the Act claims can be served on an ordinary place of business or other premises provided for in the construction contract, whether they are open or not. Service on a company's registered office is also valid service, so if you use an accountant or other advisor as your registered office you should ensure that they have a process in place to check for claims over the break.

Most claims for payment said to be made under the Act and relating to construction work or related goods and services will attract the operation of the Act. Given the potentially dire consequences of not responding to a claim in time, it is important that any claims for payment that are received are carefully examined and not simply left in the in-tray of someone on leave. Relatively innocuous looking invoices can often result in significant judgments under the Act.

If a simple procedure to check for claims is put in place, you can avoid receiving an unwanted Christmas present in the New Year. If you have any concerns in relation to a document you receive, we recommend you seek advice from us as soon as possible to avoid a situation where your time to provide a response has expired.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.