Security of Payment Definitions NSW

These definitions summarise and simplify what are often complex provisions under the Act. They are not necessarily exhaustive and should not be relied on in the event of a dispute. Detailed definitions are generally contained in section 4 of the Act although other definitions may be summarised from the body of the Act.

"Adjudication" also known as "Security of Payment" is a statutory dispute resolution process that has revolutionised the building and construction industry. The process is quick, informal and inexpensive. It is proving to be popular in its purpose of ensuring money flows quickly and fairly between industry parties.

"Adjudication Application" is an application made by a claimant to Adjudicate Today or other ANA for adjudication of a payment dispute under a construction contract. In order to be valid strict time frames must be followed.

Adjudicate Today staff will assist parties in complying with the procedures and time frames under the Act but, as they must be independent of the parties, cannot help develop submissions or give legal advice.

"Adjudicated Amount" is the amount of the progress payment that an adjudicator determines is to be paid by the respondent to the claimant.

"Adjudication Certificate" is a certificate provided by Adjudicate Today or other ANA on application by a claimant when the respondent fails to pay the whole or any part of the adjudicated amount in a determination. This can be filed in court as a judgment debt.

"Adjudication Response" is the response of a respondent to the claimant's adjudication application. In order to be valid strict time frames must be followed.

"Business Day" is any day other than a Saturday, Sunday or public holiday or 27, 28, 29, 30 or 31 December.

"Claimant" is a person who serves a payment claim for construction work, or supplied related goods and services, under a construction contract.

"Claimed Amount" is the monetary amount claimed in the progress claim.

“Construction Contract” means a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party.

"Construction Work" is work defined in section 5 of the Act. The construction work must be carried out in NSW after 26 March 2000. The term does not apply to domestic building work if the owner is party to the contract AND the contract relates to a building or part of a building where the owner resides or intends to reside.

"Determination" is the adjudicator's decision.

"Due Date for Payment" is the date on which a payment claim becomes due and payable in accordance with the terms of the contract. However for most, but not all contracts, the Act sets a maximum time period for the due date for payment which overrides any contractual provision which is longer. Click here for details on calculating the due date for payment.

"Exempt residential construction contract" means a construction contract that is connected with an owner occupier construction contract or is a contract prescribed by regulation.

"Head Contractor" is someone engaged by the principal to carry out construction work or related goods and services and for whom work is carried out (subcontracted) on that project. Note: There is no head contractor when the principal engages directly with subcontractors.

"Intention to Suspend Work" means the right of a claimant to suspend construction work or the supply of related goods and services. The notification to suspend work must be in writing and provide 2 business days’ notice. This right arises on:

• the respondent's failure to provide a payment schedule and pay the claimed amount by the due date; or
• provision of a payment schedule but failure to pay the scheduled amount by the due date; or
• failure to pay an adjudicated amount.

"Payment Claim" is a claim for a progress payment under a construction contract. It must identify the construction work or related goods and services and the amount claimed to be payable.

In relation to disputes over contracts (written or oral) made before 21 April 2014 or contracts which relate to a property where the owner resides or intends to reside and the owner did not contract directly with the claimant, the payment claim must also state: "This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999" or words to that effect.

"Payment Schedule" is the response served by a respondent to a payment claim. It must identify the payment claim to which it relates and indicate the amount of payment, if any, which the respondent proposes to make. If the respondent proposes to pay less than the claimed amount then reasons must be given for withholding payment.

"Principal" is the person for whom construction work is to be carried out or related goods and services provided under a construction contract and is not themselves carrying out construction work or supplying related goods and services under the contract.

"Progress Payment" is a payment to which a person is entitled. This includes "milestone" payments, a single one-off payment or the final payment for construction work or the supply of related goods and services.

"Reference Date" is either the date for making progress claims as stated in the contract, or if the construction contract does not address this, then it is the last day of each named month.

"Related Goods and Services", includes materials, components, plant or material forming part of, or for use in connection with, the construction of any building, structure or work; and services including the provision of labour, professional services and related goods and services.

"Respondent" is a person who has received a payment claim and is or may be liable to make a payment under a construction contract for construction work or related goods or services.

"Scheduled Amount" is an amount of money that the respondent proposes to make in response to a payment claim. If the scheduled amount is less than the claimed amount, the schedule must provide reasons for withholding payment.

"Secretary" means the Commissioner for Fair Trading, Department of Finance, Services and Innovation or, if there is no Commissioner, the Secretary of the Department.

"Section 17(2) Notice" is a notification that the claimant serves on a respondent when it has not received payment and has not received a payment schedule within the time frames. It provides the respondent with a further 5 business days to serve a payment schedule or pay the payment claim in full before the claimant applies for adjudication.

"Subcontractor" is a person carrying out construction work or supplying related goods and services under a construction contract otherwise than as a head contractor. Note: A subcontractors contract can be with the head contractor or (when there is no head contractor) with the principal directly.

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