The Act primarily affects participants in contracting chains for construction work and material supply.

Unpaid persons are the principal beneficiaries. Section 5(1) and the note to that section identify them as tradespersons, labourers, suppliers or corporations owed money for work or materials. Because s 3(3) incorporates the definitions of “construction work” and “related goods and services” from the Building and Construction Industry Security of Payment Act 1999, the class includes head contractors, subcontractors, sub-subcontractors, consultants, plant hirers and material suppliers operating in the building and construction industry.

Defaulting contractors are the intermediaries who have failed to pay. They are defined by reference to the unpaid person’s claim (s 3(1)) and become subject to information obligations under s 15. A defaulting contractor who supplies false information commits an offence.

Principals are the persons or entities who engaged the defaulting contractor and who owe money under that contract. Once served with a notice of claim they assume the statutory duty to redirect payments (s 9) and may face direct suit under s 11. Principals further up the chain can become subject to successive applications of the Act via s 16.

Courts (including the Local Court for offences under s 20) are required to issue debt certificates, make attachment orders and determine priority disputes. The definition of “court” is not limited, so the District Court and Supreme Court may also issue certificates when giving judgment.

The Minister approves forms (s 3(1)) and is obliged to conduct a policy review (s 24), although the latter obligation is spent.

Adjudicators and authorised nominating authorities under the security-of-payment regime are indirectly affected because an adjudication certificate filed as judgment triggers the debt-certificate pathway (s 7(1A)).

The Act does not bind the Crown in right of the State or an authority of the State in a way that would prejudice existing rights prior to publication of transitional regulations (Sch 1 cl 1(3)), but otherwise operates across both private and government contracts.

Unpaid persons hold the right to apply for a debt certificate once judgment is obtained (s 7(1)), to serve a notice of claim (s 6), and to receive redirected payments (s 9). They enjoy a statutory assignment valid at law (s 11(1)) and may sue in their own name. They must provide a discharge notice within 7 days of a request after receiving payment (s 13(1)), or forfeit the amount paid. They may also apply for an attachment order before judgment (s 14).

Principals are under a duty, after service of a notice of claim, to pay the assigned sums to the unpaid person rather than the defaulting contractor (s 9(1)). They must observe the 7-day priority window before making any payment (s 10(3)) and, where equal priority exists, distribute pro rata (s 10(4)). A principal who continues to pay the defaulting contractor after notice remains liable to the unpaid person (s 11 note). Principals may rely on pre-notice defences (s 11(4)) and are protected if they make payments in good faith before receiving notice of discharge (s 12(3)).

Defaulting contractors must, on demand, supply the name of any principal (s 15(1)). They retain rights under the head contract except to the extent payments are assigned. They may request a discharge notice and, if the unpaid person fails to provide it, recover the penalty sum as a debt (s 13(3)).

Courts hold discretion to issue debt certificates, refuse them where a lien is practicable (s 7(3)), and make, vary or set aside attachment orders (s 14(6)). They must be satisfied of the jurisdictional facts before granting an attachment order (s 14(3)).

All parties benefit from the preservation of other remedies (s 19) and the prohibition on contracting out (s 18).

The Act creates two offences. Under s 15(1), a defaulting contractor who fails to supply the required information after demand faces a maximum penalty of 20 penalty units. The same maximum applies to a person who knowingly gives a false or misleading notice (s 15(2)). Proceedings for these offences are dealt with summarily before the Local Court (s 20).

The more significant enforcement mechanism is civil. Failure by a principal to redirect payments gives the unpaid person a direct right of recovery in their own name (s 11). Because the assignment is declared valid at law, ordinary debt-recovery processes apply. An unpaid person who fails to furnish a discharge notice within 7 days after request must “forfeit and pay” a sum equal to the amount paid; this sum is recoverable as a debt (s 13(3)).

Attachment orders under s 14 freeze monies payable upstream, providing pre-judgment security. Breach of an attachment order would constitute contempt, although the Act itself does not create a specific statutory offence.

No criminal sanctions attach to a principal’s failure to pay; the sanction is personal liability to the unpaid person. The 12-month limitation period in s 17 is a strict outer bound for proceedings “under this Act”.

The Act is expressly linked to the Building and Construction Industry Security of Payment Act 1999. Section 3(3) imports that Act’s definitions of construction work and related goods and services. More importantly, s 7(1A) permits a debt certificate to issue on the basis of an adjudication certificate filed as judgment. This creates a fast-track route for claimants who have used the security-of-payment adjudication pathway.

The Act does not affect rights under the Industrial Relations Act 1996 (s 19(c)), preserving industrial remedies for employees.

It repealed the Contractors’ Debts Act 1897 and contains transitional provisions that extend its operation to pre-repeal work provided the debt did not become payable more than three months before repeal (Sch 1 cl 4).

Because it operates by statutory assignment, it interacts with general assignment and equitable principles, but s 11(1) declares the assignment “valid at law”, removing the need for compliance with equitable formalities. The priority rule in s 10 displaces the ordinary rule in Dearle v Hall for competing statutory assignments.

Section 18 renders void any contractual term that annuls, varies or excludes the Act’s provisions, mirroring similar “no contracting out” clauses in security-of-payment legislation.

The Act sits alongside the Corporations Act 2001 (Cth) in insolvency scenarios; an unpaid person who has obtained an assignment may still need to prove in the defaulting contractor’s liquidation, but the principal’s obligation is to pay the assignee directly.

The most significant amendments occurred in 2002 (No 133, Sch 2). These inserted the reference to the Building and Construction Industry Security of Payment Act 1999 into the definitions (s 3(3)) and added s 7(1A) to allow debt certificates on the basis of filed adjudication certificates. The amendments were a direct response to the introduction of the rapid adjudication regime in 1999 and the perception that unpaid subcontractors still faced cash-flow difficulties even after obtaining an adjudication determination. By linking the two statutes, Parliament gave successful adjudication claimants an additional, self-executing recovery mechanism against upstream principals without the need for fresh court proceedings.

Section 14 was amended in 2004 (No 55, Sch 2.5) to update procedural language following court reforms. Minor amendments to s 20 reflect changes to the jurisdiction of the Local Court.

No substantive amendments have been made since 2004. The statutory review required by s 24 was completed within the prescribed timeframe, but the Act has remained largely stable, suggesting that the 2002 integration with the security-of-payment regime addressed the principal policy gap identified at the time of its passage.

The legislation has generated limited reported case law, consistent with its self-executing design. Disputes that do reach court typically concern whether the nexus test in s 5(2) is satisfied, the validity of the underlying judgment, or the scope of available defences under s 11(4).

A recurring controversy is the interaction with security-of-payment adjudication. Because an adjudication certificate can found a debt certificate, principals have argued that defects in the adjudication process should permit collateral attack on the debt certificate. Courts have generally held that the debt certificate follows the judgment and that substantive challenges must be brought by way of separate proceedings to set aside the judgment.

The 7-day priority window in s 10 has produced practical difficulties where multiple unpaid persons serve notices in quick succession. Principals have complained of administrative burden in calculating pro-rata shares, especially where certified debts are disputed after service. The Act provides no express mechanism for the principal to interplead; the principal must either pay into court or risk multiple suits.

The information obligation in s 15 has been criticised as easily circumvented by contractors who simply refuse to respond, leaving unpaid persons without knowledge of the principal’s identity. While the offence provision exists, enforcement is rare.

In multi-tiered projects, questions arise whether s 16 can be used indefinitely up the chain. The Act’s language supports successive application, but practical obstacles (limitation periods, identification of further principals) limit its utility beyond two or three tiers.

Most practitioners assume the debt certificate is available as of right once judgment is entered. Section 7(1) uses the word “may”, and s 7(3) contains a mandatory refusal where a possessory lien is practicable. Courts have refused certificates where the applicant retains control of plant or materials.

The 120-day wages cap in s 7(2) is often overlooked. A labour-only subcontractor who has gone unpaid for six months can certify only four months’ wages; the balance must be pursued by ordinary debt recovery.

Section 10(3) is a trap for principals. Even though s 9 appears to require immediate payment, the principal must wait until the 7-day period expires before disbursing to any claimant. Early payment to the first server can expose the principal to liability to later claimants who enjoy equal priority.

The discharge-notice penalty in s 13(3) is draconian and self-executing. An unpaid person who cashes a cheque but neglects to provide the approved-form notice within 7 days of request can be required to repay the entire sum. The penalty is not a fine but a civil debt, and courts have enforced it strictly.

Section 16 is more powerful than many realise. It allows an unpaid person to treat a non-paying principal as a new defaulting contractor and serve a fresh notice on the head principal. However, each new assignment still requires a fresh debt certificate against the immediate debtor, creating a chain of judgments that can become costly.

The limitation period in s 17 runs from when the assigned debt “becomes payable” to the defaulting contractor, not from the date of the unpaid person’s own invoice. This can produce counter-intuitive results where the head contract contains milestone or practical-completion payment triggers.

Finally, the Act does not bind the Crown in a manner that prejudices pre-existing rights, yet many government contracts contain “pay when paid” clauses. Although s 18 voids such clauses, enforcement against government entities still requires careful navigation of procurement rules and potential sovereign immunity arguments in respect of attachment orders.

For unpaid persons:

1. Obtain judgment (or file an adjudication certificate as judgment).
2. Apply promptly for a debt certificate in the approved form.
3. Serve the notice of claim on the principal as soon as possible to secure priority.
4. Monitor the 7-day window for competing notices.
5. Provide discharge notices immediately upon request after receiving payment.
6. Where the principal’s identity is unknown, first demand information from the defaulting contractor under s 15.

For principals:

1. Upon receipt of a notice of claim, immediately cease payments to the defaulting contractor.
2. Do not pay any claimant until at least 7 days after the first notice.
3. Calculate pro-rata shares if multiple equal-priority claims exist.
4. Retain records of all payments made to unpaid persons.
5. If in doubt about validity of the debt certificate, seek urgent legal advice rather than ignoring the notice; continued payment to the contractor will not discharge liability.
6. Consider inserting contractual mechanisms (consistent with s 18) that require subcontractors to notify of downstream claims.

For defaulting contractors:

1. Respond immediately to any s 15 demand with accurate information.
2. Request discharge notices from unpaid persons upon making payment.
3. Be aware that any payment made directly to you after a notice of claim has been served may still be claimed from you by the unpaid person.

General compliance tips:

• Use only Minister-approved forms; deviations risk invalidity.
• Diary the 12-month limitation period from the date the money would have been payable to the defaulting contractor.
• In construction contracts, maintain clear records of all upstream and downstream agreements to facilitate rapid identification of principals.
• Where security-of-payment adjudications are on foot, coordinate the timing of filing the adjudication certificate as judgment with the application for a debt certificate to maximise speed of recovery.

Compliance is essentially procedural. The Act rewards prompt action, accurate documentation and strict adherence to the statutory sequence. Failure at any step—particularly in obtaining the debt certificate or observing the 7-day priority rule—can unravel the entire recovery pathway.