Security of Payments — a reminder

LG Leader December 2018

The Building and Construction Industry Security of Payments Act 2009 (“SoP Act”) has been around for almost a decade in South Australia. However, we still see principals and contractors getting it wrong – often with significant but avoidable results.

The SoP Act most often applies to councils in their role as the principal under a building contract so it is worth remembering the following key points which, generally, arise for councils:

• the SoP Act operates to protect contractors from unreasonable actions by principals. It is, effectively, consumer protection style legislation for the benefit of contractors;
• if a contractor issues a payment claim which complies with the SoP Act, the council has 15 days to determine whether or not the claim is correct and whether it will pay the full amount of the claim;
• if the council doesn’t agree with the invoice or the amount of the claim, it must issue a payment schedule to the contractor outlining why it disagrees and the amount that it will pay;
• if the council doesn’t issue a payment schedule, it must pay the amount claimed in accordance with the payment terms under the contract and the council will have lost many of its rights in relation to any future adjudication of a dispute between the council and the contractor; and
• the payment claim and payment schedule will be the main documents which will be considered by an adjudicator (which is nominated by someone appointed by the contractor) if there is a dispute, so they are important to get right and submit of time.

We have seen a number of disputes between principals and contractors which arise because the principal doesn’t treat payment claims with the importance that the SoP Act requires. Their future rights are affected as a result.

If you would like to discuss your payment claim review processes and your rights and obligations under the SoP Act, please contact us on 08 8113 7100.