NORTHERN TERRITORY

The security of payment legislation in the NT is the Construction Contracts (Security of Payments) Act (NT) (NT Act).

Construction Contracts (Security of Payments) Act (NT) (NT Act)

The NT Act is based on the WA Act and is supported by the Construction Contracts (Security of Payments) Regulations 2005 (NT) (Regulation). See WA Act section. The differences to the NSW legislation are similarly relevant to the NT Act.

When does the legislation apply?

The NT Act applies to construction contracts to carry out construction work or supply relevant goods and services in the Northern Territory, entered into after 1 July 2005 irrespective of:

• whether those contracts are written or oral, or a combination of both;
• where those contracts were entered into; or
• whether those contracts were expressed to be governed by the law of a place other than the Northern Territory.

Under the NT Act, the term ‘construction work’ is given a more extensive definition than that in other jurisdictions such as the NSW Act.

Additional items of construction work in the NT Act include: 

• constructing structures that form or will form part of the seabed, although constructing watercraft is expressly excluded; 
• installing insulation, furniture or furnishings; and
• the exclusion of artistic works from the definition of construction work does not apply. 

A construction contract cannot include: 

• ‘pay if paid’ and paid when paid provisions; and
• provisions requiring progress payments to be made later than 30 working days after being claimed, otherwise payment will be deemed to be required to be made within 30 working days of being claimed.

Parties entering into high value construction contracts may opt-out of the statutory adjudication regime created by the NT Act provided the contract contains an alternative payment dispute resolution mechanism compliant with the Regulations.

In circumstances where existing contracts contain an alternative payment dispute resolution mechanism which complies with the Regulation, the parties may be able to retrospectively opt out of the NT Act by the parties expressly agreeing in writing (after commencement) that the alternative payment dispute resolution mechanism is to apply.

High value construction contracts are defined as 500,000,000 monetary units in the Regulations.

What rights does the legislation confer on contractors?

The right to be paid

The NT Act provides that where a construction contract does not have a written provision about the amount the contractor is to be paid or means of determining the amount, there is an implied term that the contractor is entitled to be paid a reasonable amount for the obligations performed.

When and how can a contractor make a claim

If a construction contract does not contain written provisions about the contractor’s right to claim progress payments for obligations performed under the construction contract, then that right will be implied into the contract.

A payment claim must:

• be in writing;
• be addressed to the party to which the claim is made;
• state the name of the claimant;
• state the date of the claim;
• state the amount claimed;
• if the claim is made by the contractor, itemise and describe the obligations the contractor has performed and to which the claim relates in sufficient detail for the principal to assess the claim;
• if the claim is made by the principal, describe the basis for the claim in sufficient detail for the contractor to assess the claim;
• be signed by the claimant; and
• be given to the party to which the claim is made.

There is no requirement that the payment claim must include the endorsement that it is made under the NT Act.

What must a principal do when faced with a claim?

If a construction contract does not contain provisions about when and how the other party must respond to a payment claim and by when a payment must be made, the NT Act provides that in the case of a disputed claim, where the party receiving the payment claim either:

• believes that the claim should be rejected, as it has not been made in accordance with the construction contract; or
• disputes the whole or part of the claim,

that party must within the time provided in the construction contract, or where no such provision is made, within 10 working days of receiving the payment claim issue a notice of dispute to the claiming party and pay the amount of the claim that is not disputed. 

If the payment claim is not disputed the party receiving the claim must within the time provided under the construction contract (to the extent that it is less than 30 working days) after receiving the payment claim, pay the whole of the amount of the claim. Where no such provision is made, an undisputed claim must be paid within 20 working days after receiving the payment claim.

A notice of dispute must:

• be in writing;
• be addressed to the claimant;
• state the name of the party giving the notice;
• state the date of the notice;
• identify the claim to which the notice relates;
• if the claim is being rejected because it is not made in accordance with the contract, state the reasons;
• if the claim is being disputed identify each item of the claim that is disputed and state, for each item, the reasons for disputing it; and
• be signed by the party giving the notice.

What are the contractor’s rights if not paid – how does a contractor enforce its rights?

Right to interest on overdue payments

Where a construction contract does not contain a provision entitling a party to interest on overdue amounts, then interest will be payable on overdue amounts at the rate of interest prescribed in the Regulations. 

Right to ownership of goods

Where a construction contract is silent as to the passing of ownership of goods related to the construction contract, ownership will only pass when the contractor has been paid or when the goods become fixtures.

Where a construction contract is silent as to the treatment of unfixed goods upon a principal becoming insolvent and goods have been supplied to the site but are not yet fixtures, the principal must not allow the goods to become fixtures or to fall into the possession of or under the control of another person (other than the contractor) except with the prior written consent of the contractor. The principal must also allow the contractor a reasonable opportunity to repossess the goods.

Adjudication

Adjudication of disputes

Where a payment dispute arises under a construction contract (for example, when a payment claim has been made under a contract and either the claim has been rejected or disputed or when a principal does not make a payment due), a contractor may make an application for adjudication under the NT Act.

How and when to apply for adjudication

To apply to have a payment dispute adjudicated, a party to the contract must, within 65 working days  after the dispute arises (or, if applicable, within 20 working days after a previous application has been dismissed) prepare a written application and serve it on the other party to the contract and the adjudicator or the prescribed appointer. The parties may nominate the adjudicator in the contract or a prescribed appointer who is required to nominate the adjudicator. The appointer must within 5 working days of being served with an adjudication application appoint an adjudicator and notify the parties.

The application must:

• set out the name and contact details of the appointed adjudicator or prescribed appointer;
• set out the applicant’s name and contact details;
• set out the name and contact details of each other party to the contract;
• set out the details of the construction contract involved (or relevant extracts);
• set out the payment claim that has given rise to the dispute; and
• state or attach the information, documentation and submissions on which the party making it relies in the adjudication

How to respond to an adjudication application?

The party that has received an application for adjudication must prepare a written response within 15 working days and serve it on the applicant and any other party who has been served with the application (such as the appointed adjudicator or prescribed appointer).

The response must: 

• set out the name and contact details of the appointed adjudicator or prescribed appointer;
• set out the applicant’s name and contact details;
• set out the respondent’s name and contact details;
• set out or attach details of the rejection or dispute in relation to the payment claim; and
• state or attach all the information, documentation and submissions on which the party making it relies in the adjudication, however, it is unnecessary to include material which has been provided in the Application.

The adjudication procedure 

The adjudicator is required to determine the payment dispute within 10 working days after the date of the service of the response, or if there was no response, 10 working days after the last date on which the response was required to be served.  An adjudicator may also request an additional 5 working days. 

The adjudicator may dismiss the application without considering the merits of the application if:

• the contract is not a construction contract;
• the application has not been prepared and served as required by the NT Act;
• the dispute is also the subject of a separate application;
• an order, judgment or other finding has been made about the dispute that is the subject of the application; or
• the adjudicator is satisfied that it is not possible to fairly make a determination due to the complexity of the matter or because the prescribed time is not sufficient.

However, an adjudicator may determine an application containing technical deficiencies if those deficiencies do not affect the merits of the application and the Act has been substantially complied with.

The determination made by the adjudicator must:

• be in writing;
• conform to the NT Regulations;
• state the amount to be paid, the date by which it must be paid and any interest that may be payable, or in the case of security to be returned, the date by which it must be returned;
• give the reasons for the decision in the adjudication; and
• identify any information in it that, because of its confidential nature, is not suitable for publication.

The determination will be binding on the parties to the construction contract, even if other proceedings relating to the payment dispute have been started before an arbitrator or other person or a court or other body.

Right to suspend

If on the date stated in the notice, the principal has not paid the contractor the amount in accordance with the determination, the contractor may, by giving 3 working days’ notice, suspend the performance of its obligations until no longer than 3 working days after the amount is paid. The contractor’s notice must comply with the requirements set out in the Regulations in relation to the notice of suspension.

Right to judgment debt

A determination may be enforced as a judgment for a debt in a court.

Updated August 2020