Making A Security of Payment Claim

Making a Security of Payment Claim

By John Vizzone

All builders and tradespeople have all experienced the frustration of not being paid at some stage of their life. In fact we all have, even lawyers!

There is nothing more annoying than when you are not paid and such times can cause financial hardship for your business and ultimately your family.

But did you know that you could recover money from a third party even if you did not directly contract with that third party?

Yes it is true, although it is very difficult to achieve without the right legal advice.

The Building and Construction Security of Payment Act allows subcontractor’s to recover monies owed to them from the head contractor when their own contractor refuses to pay.

The diagram below shows how a Security of Payment Claim can work in your favour.

Security of Payment

The Benefit of Security of Payment Claim

The head contractor engages a contractor  to supply goods and labour for a building site.

The contractor then engages its own subcontractors to complete various jobs such as electrical work, plumbing and carpet laying.

The contractor fails to pay the subcontractors and tells them that it is insolvent and will be winding up so they may never be paid.

Subcontractor 1 and 2 are owed $50,000. They did not make a Security of Payment Claim. Their only option is to take the Non-Paying Contractor to Court.  But they are already out of pocket $50,000 and how will they enforce Judgment if the Non-Paying Contractor is wound up?

Subcontractor 3 had legal advice and made a Security of Payment Claim. They are also owed $50,000.

Subcontractor 3 made a successful claim which means that it has Judgment against the Non-Paying Contractor. However, the Head Contractor owes the Non-Paying Contractor $70,000.

The Security of Payment Claim by the subcontractor means that by law the head contractor has to pay the subcontractor the $50,000 the subcontractor is owed.

Although the Security of Payment system is a very useful tool for businesses and tradespeople it is not used often enough due to the very technical and complex process you need to go through to make a successful claim.

In fact many lawyers find it too complicated!

I have had much recent success using this powerful tool for my clients and I have the following tips.

Top 5 Tips for a Successful Security of Payment Claim From John Vizzone:

1. Ensure your initial contract states that the contract and any payments under the contract will be in accordance with the Building and Construction Industry Security of Payment Act.

2. Ensure that each time you send an invoice or bill to the contractor that you state on the invoice or bill that it is a payment claim in accordance with the Building and Construction Industry Security of Payment Act.

3. Act quickly. A Security of Payment Claim is quite complex and there are various steps you need to follow with very short time frames to complete them by.

4. Involve the head contractor. The head contractor often will be annoyed that you are not paid and will want to help or put pressure on the non-paying contractor.

5. Seek quality legal advice.  Making a Security of Payment Claim is very difficult and it is important you get quality legal advice. Investing a small fee in a quality lawyer or solicitor can mean that you recover thousands of dollars that you may have well kissed goodbye to.

Want any more information?

Please feel free to contact John Vizzone who is a successful commercial lawyer at Vizzone Ruggero & Associates who has enjoyed recent success with Security of Payment Claims.

Phone: 02 9667 1271


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