If you have finished your work, issued an invoice and waited too long to get paid, you may be able to make a payment claim made under the Building & Construction Industry Security of Payment Act 1999 NSW (SOPA) which requires either full payment or a response that is valid under SOPA within 14 days. We discuss how you can use this fast and effective means of getting paid quickly, rather than enduring the more conventional (i.e. slow, complicated and costly) alternatives of winding up and litigation.

SOPA was recently used with considerable success by the owners of a dredge, not only to recover unpaid hire from the charterers, but to also secure payments due from the head contractor to the charterer. The recent decision of the Full Court of the Federal Court of Australia in Birdon Pty Ltd v Houben Marine Pty Ltd [2011] FCAFC 126 recently upheld the validity of SOPA in the maritime context.  

Houben Marine had demise-chartered a dredge and various hopper barges to Birdon for dredging inland waterways at Henderson Wharf, Western Australia and Garden Island, Sydney. When Birdon failed to pay the hire invoices, Houben served a payment claim under SOPA on Birdon, seeking payment of the outstanding invoices. Birdon then served Houben with a payment schedule under SOPA, disputing payment of all of the invoices but went further by seeking an injunction against Houben in the Federal Court of Australia to prevent Houben from continuing to recover the outstanding hire under SOPA, arguing that the procedure under SOPA was invalid for disputes concerning demise charterparties. Prior to the injunction, Houben also secured some of the hire by serving a payment withholding request under SOPA on the head contractor to the project, Defence Maintenance, preventing them from paying monies owed to Birdon under the head contract.

The Full Court held by majority that the procedure for obtaining payment of invoices under SOPA was valid in the context of recovering unpaid hire under charterparties, even though the claim for unpaid hire could have also been litigated under the Admiralty Act 1988 (Cth). The court went further and held that there was nothing in SOPA which interfered with the jurisdiction of a Commonwealth Court, and that SOPA did not take away the power of a Commonwealth Court to hear the dispute if proceedings were commenced. Birdon then applied for special leave to the High Court of Australia to appeal the Full Court decision but the claim settled prior to the application, so the Full Court decision stands.

SOPA is far-reaching in that it applies to contracts for:

  • Construction work which includes the construction, alteration, repair, restoration, maintenance, extension, demolition, or dismantling of any works forming docks, harbours, or inland waterways.
  • The provision of plant or materials, or the material and components for the construction alteration, repair, restoration, maintenance, extension, demolition, or dismantling of any works forming docks, harbours, or inland waterways.

The SOPA procedures come with several other advantages:  

  • A short timetable following service of the payment claim, followed by an adjudication which can be filed in court as a judgement debt.
  • No risk of adverse costs orders, even if payment claim is unsuccessful.
  • Security for payment by serving a withholding request on the principal for the project, preventing money being paid to the sub-contractor until the adjudication application is decided.
  • You can give 2 days’ notice of an intention to suspend works under the construction contract pending payment in certain circumstances.  

On the flipside, if you receive a payment claim under SOPA, you should act quickly as you will lose any rights to contest the claim under that procedure if you fail to comply with the strict timetable legislated under SOPA.