Amendments to the Building and Construction Industry Security of Payment Act 1999 (the Act) passed on 21 November 2018 will be commencing on 21 October 2019. The amendments will apply to all Construction Contracts entered into from 21 October 2019 with the existing regime to continue to apply to all previous contracts.
The amendments bring about two important changes for contractors claiming progress payments.
Importantly, all rights under the Act flow from the service of a valid Payment Claim. Under the current regime a Payment Claim will be invalid if it is not issued on or after an available Reference Date. This oversight is by far the most common factor affecting the validity of a Payment Claim and is unlikely to change despite the change in terminology affected by the amendments.
Reference Dates may seem boring but when a head contractor is holding back money that should be in your bank account and your employees and subcontractors are demanding payment, they can suddenly become very important.
One of the most talked about amendments to the Act is the abolition of the concept of a Reference Date. However, Reference Dates will continue to be relevant to progress claims under pre-21 October 2019 contracts.
- For pre-21 October 2019 contracts a Payment Claim can only be served on or after a Reference Date, namely, the date determined in accordance with the contract as the date upon which a claim for a progress payment may be made, or
- If the contract makes no express provision in relation to the matter, the last day of the month in which construction work was first carried out and the last day of each subsequent named month.
Abolition of Reference Dates: Reference Dates by another Name
For contracts entered into from 21 October 2019 the concept of a Reference Date will cease to exist. Instead, a contractor who has carried out work under a Construction Contract will be entitled to serve a Payment Claim:
- On and from the last day of the month in which the construction work was first carried out and on and from the last day of each subsequent named month, or
- If the relevant contract makes provision for an earlier date for the serving of a Payment Claim in any particular named month, the Payment Claim may be served on and from that earlier date instead of on and from the last day of that month, and
- On or after the date of termination of the contract.
Despite the abolition of Reference Dates, the validity of a Payment Claim will still depend on there being an available date by reference to which the Payment Claim was entitled to be served.
It will also remain the case that only one Payment Claim can be served in relation to any date by reference to which the contractor was entitled to claim a progress payment.
Statement under the Act
The second relevant amendment for claiming progress payments is the reinstatement of the requirement that a Payment Claim must state that it is made under the Act. A statement to the following effect should, therefore, now be included in any document intended to constitute a Payment Claim under the Act: “This is a Payment Claim made under the Building and Construction Industry Security of Payment Act 1999.”
A Payment Claim under a pre-21 October 2019 contract may still, however, be valid despite the absence of such a statement.
Despite the abolition of Reference Dates, contractors need to remain vigilant of when they are entitled to claim a progress payment under a contract (and/or the Act) as a document purporting to be a Payment Claim that does not relate to such a date will not be valid and will not enliven the unique rights that would otherwise flow under the Act.
Contractors should also ensure that all progress claim templates and forms are updated and include a statement that the claim is made under the Act where the claim is intended to be a Payment Claim.
Finally, contractors would be wise to review their contracting procedures and standard form documentation to make Construction Contracts that specifically create a right to serve a Payment Claim on an earlier date, should they wish to be able to serve Payment Claims before the end of the month.