On 28 February 2011 the Building and Construction Industry Security of Payment Amendment Act 2010 (NSW) will come into force which contains a new Part 3 that deals with payment due to sub-contractors by head contractors.
Currently the position is that sub-contractors must follow an adjudication process if they are not paid by the head contractor. In a few recent cases the head contractors went insolvent before the adjudication process was finalised and the sub-contractors were left in the cold. Sub-contractors had no security for any outstanding monies due to them.
The new amendments to the Act now allows a sub-contractor who has started an adjudication process to require the principal not to pay all monies due to the head contractor but to retain enough money to cover the payment claim of the sub-contractor.
The sub-contractor may serve a ‘payment withholding request’ on the principal and it is important to note that if the principal refuses to retain an amount equal to the payment claim of their sub-contractor, the principal becomes jointly and severally liable with the head contractor towards the sub-contractor.
Where a sub-contractor is unaware of the identity of the principal, it may request the adjudicator to direct the head contractor to disclose the details of the principal to the sub-contractor.
The new amendments provide more security for sub-contractors which may limit the commencement of adjudication processes where there is a dispute relating to the payment of a sub-contractor’s claim.
It is important that principals specifically be aware of their obligations under the new amendments when they receive a payment withholding request from a sub-contractor. Principals must respond in an appropriate way to avoid becoming liable to the sub-contractor.
If you require any further information and/or advice in relation to these amendments please do not hesitate to contact our office.