All states and territories of Australia have their own legislation governing payment claims for building work or related goods and services. In New South Wales it is the Building and Construction Industry Security of Payment Act 1999 (BCISPA).

BCISPA’s scope covers most building work and related goods and services, no matter what the industry, with only a few exceptions. It often, indeed almost always, applies to residential and aged care facilities, and the owners and managers of such facilities (Providers) need to be very mindful of it.

Currently the payment claim regime under the BCISPA is only enlivened if the payment claim is endorsed with the words ‘This is a payment claim made under the Building and Construction Industry Security of Payment Act’ or words to that effect. This puts Providers on notice that BCISPA applies and that failure to respond to such a claim within 10 days, in the manner required by BCISPA, results in the amount claimed becoming a statutory debt, with the Provider being prohibited from bringing any cross claim against the contractor or raising any defence in relation to matters arising under the contract. It is an intentionally harsh regime.

The Provider is put on the back foot and the chances are it will have to pay, in full. It’s a case of pay now, argue later. Recovery of over-payments involve either resolution through negotiation (in circumstances where the bird is already in the contractor’s hands) or court action, the latter often not being commercially viable.

Most Providers have adopted procedures monitoring incoming documents, ensuring claims are identified, reviewed and responded to in time, thus ensuring that any amounts over-claimed are responded in a manner that protects the Provider’s interests. Those that don’t, run the risk of nasty surprises.

Despite the considerable risk already presented by BCISPA, that exposure will, very shortly, widen. From a day in April 2014 (still to be announced) the endorsement, ‘This is a claim under the Building and Construction Industry Security of Payment Act’ will no longer be required for BCISPA to apply[i]. Any document that identifies construction work (or related goods and services) and indicates the amount alleged by the contractor/supplier to be due, could be subject to BCISPA.

Accordingly, unless responded to in the manner required by BCISPA, the Provider runs the risk of becoming indebted to the contractor in the full amount of the claim. All a document need do to be a payment claim under BCISPA is:

1. identify the construction work or the related goods and services to which it relates; and
2. indicate the amount the claimant claims to be due.

There is no prescribed form. The claim could be in a document headed ‘Payment Claim’ or it could be embedded in correspondence, reports, memos and relatively informal notes. The removal of the endorsement has the potential for the BCISPA to apply to a bewilderingly wide range of documents and unintended consequences seem likely.

Provider’s mailboxes, fax machines, in-boxes and reception desks will need to be closely monitored. Whilst the best defence for Providers is to ensure that payment schedules are issued, identifying documents that comprising payment claims will from a date in April 2014 be more difficult and uncertain.

Should you have any doubt as to whether a document comprises a payment claim under BCISPA or how to respond in a manner that protects your interests, please contact us.

[i] It will however be preserved in some residential building work contexts which seem unlikely to be of interest to Providers.