Security of Payments Act:

The principle of "security of payment" was formally introduced, in a legislative sense, to the NSW construction industry by the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"). The legislation applied to construction contracts entered into, on or after 26 March 2000 when the Act came into operation. Security for costs can arise in a building and construction claim. The concept of security for costs is based on the premise that a party who is involved in litigation shows that it is capable of paying any liability that falls on it as a result of an adverse court order. An application for security for costs may therefore be made by a party who has reason to believe that the other side is impecunious, and may not be able to pay any moneys (damages, court costs etc) resulting from a judge’s decision that that party is liable for certain payments. Obtaining proper legal advice from a Debt Recovery and Insurance Lawyer may be greatly beneficial if you are in the process of making an insurance claim.

The Act aimed to provide a better, cheaper and quicker method of being paid for progress claims for work in the building and construction industry. The security of payment legislation covered all contracts (written and oral) for building and construction work and the supply of related goods and services within NSW, with the main exception of direct contracts with homeowners that were covered by the Home Building Act 1989 (NSW). All progress claims for payment were covered in respect of claims by: contractors against clients; subcontractors against contractors; suppliers of materials or building components against purchasers; and architects, engineers, surveyors and the like against clients (regarding the provision of building advice). The Act was amended by the Building and Construction Industry Security of Payment Amendment Act 2002 (NSW) (the Amendment Act") in order to further enhance the prospects of claimants obtaining an inexpensive and speedy avenue with respect to payments for construction work and for related goods and services under construction contracts.  Proper legal advice in from a Debt Recovery and Insurance Lawyer may be of great assistance in this regard.

A debt can arise under the Security of Payment Act from a payment claim and the payment schedule.  A contractor or builder sends a payment claim to the owner or principle of the building site, to seek payment for work done on a periodic basis.  The owner has a strict time frame to either pay the debt or dispute it using a payment schedule. If the payment claim remains outstanding the builder can approach the District Court to seek an order for costs. Alternatively, the matter can progress to adjudication and a judgment debt can be speedily obtained.  In New South Wales the Security of Payments Act sets down a mandatory regime for adjudication. Compulsory adjudication provides for an efficient and quick dispute resolution procedures. Sound legal advice from a skilled Debt Recovery and Insurance Lawyer may be advantageous to ensure that any security of payment claim is properly drafted.

The court or tribunal in which a building and construction claim is being heard may have a discretionary power to order or decline to order security for costs against any or all parties. Where the litigant is a corporation, that power derives from section 1335 of the Corporations Act 2001 (Cth). Otherwise, the power will issue from the legislation relevant to the court or tribunal itself. To exercise the discretion, all facts of the particular case must be considered, but only those facts that are relevant to the issue at hand. Some of those relevant factors may include the following: impecuniosity of the litigant, whether the claim is bona fide, the claim’s prospects of success, whether or not the order for security for costs will stultify the proceedings, whether or not the impecuniocity is the result of the respondent’s action which are the subject of the litigation or whether the litigant is suing on behalf of or for the benefit of, some third party. Other factors that are considered are delay, public interest, timing of the application for security for costs,    whether there are multiple parties and the justice issues in ordering security against a defendant.

Other considerations may also be relevant, and the law quote explicitly states that these considerations are not exhaustive. A unique case may require that all of the above be taken under consideration by a court or tribunal, or perhaps just a few. The amount of security that the court or tribunal will likely consider awarding is part of its discretion. Failure to put security into court may result in the court dismissing or staying the proceedings.

If you require assistance in relation to a security for costs claim or dispute, you may wish to contact our firm on (02) 9233 4048 or by email at info@navado.com.au and make an appointment to see one of our solicitors.

This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.