Contractors Debts Act:

The Contractors Debts Act 1997 (the Act) is legislation which enables a subcontractor to seek direct payment from the principal of monies due to the head contractor with whom he has contracted. A subcontractor will usually have an entitlement under the subcontract to recover payment from the contractor for work performed, but for which the contractor has not received payment from the principal. For a subcontractor to obtain payment from monies payable by the principal to the contractor the provisions of the Contractors Debts Act 1997 need to be invoked. For this to occur the subcontractor must be owed money for work carried out or materials supplied that the contractor would obtain payment from the Principal.

Under Construction Law, the subcontractor must first obtain judgement against the head contractor in a local court- proceedings must be taken within 12 months after the debt becomes payable. The Security of Payments Act allows this process to have a speedy resolution through the process of adjudication which requires very strict time frames for applications and responses to be provided. Subsequently, the Court issues a debt certificate pursuant to section 7 of CDA, for the amount of the judgment, on application by the subcontractor.

The subcontractor may request details of the principal from the contractor and the contractor must supply them. The subcontractor may serve a formal claim and the debt certificate on the principal. The principal is then obliged to pay to the subcontractor directly, from monies due from the principal to the contractor, the amount claimed by the subcontractor, as an assignment of that debt to the subcontractor.

The principal may request a discharge notice in accordance with s13 of the Act from the subcontractor, in which case the subcontractor must provide it and the principal is given statutory protection against claims by the contractor with respect to the monies paid to the subcontractor. The Act allows subcontractors to obtain direct payment from a principal, as the debt can be effectively assigned. The Act also does not allow the parties to contract out of this procedure.

If you require assistance with a Contractors Debts Act matter you may wish to contact our firm on (02) 9233 4048 or email info@navado.com.au and make an appointment to see one of our solicitors. 

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