This right arises under the Contractors Debts Act 1997 (NSW) (“the Act”).
Essentially, the Act provides that if a sub-contractor is owed money by a builder for work carried out for, or materials supplied to, the builder, then the sub-contractor can obtain payment of the owed money from the money that the principal contractor owes to the builder.
So, if a carpenter is having difficulties recovering monies owed by a builder, the carpenter would need to:
- obtain a judgment from the Court for the monies owed,
- issue a “Section 7 Certificate” to the principal contractor (section 7),
- serve a notice of claim on the principal contractor (section 6(1)(b)).
The service of the notice on the principal contractor operates to “assign” the monies payable by the principal contractor, from the builder to the carpenter. The principal contractor must then pay the monies owed to the carpenter.
Of course, this will only apply if the principal contractor has not already paid the builder.
The carpenter also needs to keep in mind that proceedings under the Act must be commenced within 12 months after the debt becomes payable (section 17).
There are other rights that contractors have to recover monies owed under the Security of Payment legislation, which will be covered in a subsequent post.