Building and construction companies, subcontractors and suppliers are advised to be alert as the Building and Construction Industry Security of Payment Act 1999 (NSW) and its interstate equivalents raise new risks for the building and construction industry.
With the Building and Construction Industry Security of Payment Act 1999 in force in NSW for a number of years, the longer term effect of the act is now being discovered as respondents try and balance the ledger by clawing back any overpayments made under the act in separate legal proceedings.
According to Kreisson Legal , the Building and Construction Industry Security of Payment Act 1999, aims to provide an interim solution for subcontractors, who are trying to recover money from contractors. Any payments made under the Building and Construction Industry Security of Payment Act 1999 are subject to a final determination of rights under the contract by the courts.
Kreisson Legal observe that if the court finds that too much money was paid under the Building and Construction Industry Security of Payment Act 1999, the court may order that any overpayment under the act be repaid by the claimant to the respondent.
Recovery proceedings are becoming more frequent and can be commenced many years after payments were received by claimants under the Building and Construction Industry Security of Payment Act 1999, surprising claimants who have long since spent the money. A successful claw back action by a respondent can have consequences on a company that has received payments under the Building and Construction Industry Security of Payment Act 1999.
Not only the claimant may be required to pay interest on any overpayment, as indicated in a recent decision of the Supreme Court of NSW, it is possible that the court may order that the claimant pay the costs of any claw back proceedings even if the court finds that the claimant is entitled to keep most of the money that it has received under the act. This result could potentially have a serious impact on the cash flow of claimants.
Kreisson Legal inform that as a result of these claw back actions, the Building and Construction Industry Security of Payment Act 1999 has become complex and the courts are being required to adjust the parties’ positions under the contract. If a claimant is unable to prove that it is entitled to keep any of the money paid under the Building and Construction Industry Security of Payment Act 1999, the consequences for claimants could be serious.
The threat of ongoing legal issues and the potential of long-term recoveries could discourage subcontractors from using the Building and Construction Industry Security of Payment Act 1999 and force subcontractors to resort to traditional court proceedings. For the time being and until the full impact of claw back actions can be established, the Building and Construction Industry Security of Payment Act 1999 enables decisions to be made quickly, so that cash can keep flowing until disputes over payment are finally resolved.
Used well, the Building and Construction Industry Security of Payment Act 1999 can help parties to resolve their disputes by forcing them to ‘reality check’ their entitlements and to make a decision as to whether they should continue to fight or fold. Timeframes and processes under the Building and Construction Industry Security of Payment Act 1999 are strict and not negotiable and penalise the party that is uninformed or not prepared.
Kreisson Legal note that parties can compromise valuable rights and entitlements by not knowing how to properly prepare their cases within the tight timeframes.