It seems like forever since the NSW Government passed the amendments to the Security of Payment Act in November of 2018, but the time has finally arrived and the changes will be coming into effect for all construction contracts entered into on or after the 21st October 2019.
The Act: Building and Construction Industry Security of Payment Act 1999 (NSW)
So, what are the amendments?
The amendments are comprehensive and will bring with them widespread implications across the industry, however, we have outlined the key changes below that will have an immediate effect on any contract entered into on or after Monday 21st October 2019.
1. Reference dates are gone
The requirement for a new reference date to be entitled to a progress payment has now been amended.
The amendments now allow for a progress payment to be made if you have undertaken construction works or supplied related goods and services under a construction contract.
This means that payment claims can be made once a month, or as otherwise stated under the contract (with the contract unable to provide a date extending that period beyond the usual month).
2. The magic words are back
Just like prior to April 2014, claims for contracts entered into after 21 October 2019 must state they are made under the Act.
You will need to use the magic words again:
“This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW)”.
3. Right to claim after termination
The amendments will now provide a statutory right to make a payment claim for the purposes of the Act on or from the date of termination.
Previously, if a construction contract was terminated before the reference date, it could prevent a payment claim from being served in accordance with the Act.
4. New penalties
The amendments include a range of new investigative powers and increased penalties for offences.
Authorised officers have been granted broad powers to investigate compliance with the Act and impose fines for any hindrance, delay or obstruction with investigations without reasonable excuse.
The new penalties are listed below at the end of this article.
5. Withdrawal of applications
A Claimant now has an express right to withdraw an application prior to the application being determined (however a Respondent will have an opportunity to object to this if an adjudicator has been appointed).
If an adjudicator has been appointed, the adjudicator will need to decide if it is “in the interest of justice” to uphold the objection and proceed with the adjudication.
6. No claims when in liquidation
A corporation in liquidation cannot serve a payment claim or take part in the enforcement of a payment claim or adjudication application.
If an adjudication application has not been fully determined before the corporation has entered liquidation, the application is taken to be withdrawn on the same day.
7. Shorter payment terms
The maximum time for payment claims due and payable to subcontractors has been reduced from 30 business days to 20 business days after a claim has been made, or earlier if it is provided under the contract.
The payment terms for principal to head contractor of 15 business days remain unchanged.
8. Setting aside determinations
In any proceedings for judicial review of an adjudication’s determination, if the Supreme Court finds that a jurisdictional error has occurred, the Court can order the determination to be set aside, wholly or any part thereof, or have the matter remitted to the adjudicator for re-determination.
It is important to note that the Amended Act will take effect on any construction contract entered into on or after its commencement on Monday 21 October, 2019.
The changes are going to have a considerable impact on the Building & Construction Industry, and it is important that all industry members are aware of their obligations and requirements moving forward.
If you require any assistance with Security of Payment matters or have any questions regarding the changes to the Act and their impact on you, please contact Morrissey Law & Advisory.
Other recent Morrissey Law Security of Payment articles:
What Else is Happening?
Along with the reforms to the Security of Payment legislation, the NSW Government has been working through a raft of other changes concerning the Building & Construction Industry.
The NSW Government recently called for industry input to assess the feasibility of introducing statutory trusts as a means to better protect subcontractors from contractor’s insolvency.
The features of the statutory trust model proposed for NSW can be identified from the HoustonKemp Report, which briefly notes:
- If a contractor intends to subcontract, they will need to open a separate bank account for the receipt of trust funds.
- The trust account will need to be properly maintained and include ledgers on all trust fund transactions and reconciliations on a monthly basis.
- The contractor cannot withdraw the funds unless all obligations to the subcontractors have been met.
Design and Building Practitioners Bill (2019)
Recently released as a draft for industry consultation, the Design and Practitioners Bill (2019) introduces a comprehensive range of reforms designed to address shortcomings in quality, accountability, and compliance of design documentation across the Building & Construction Industry, identified in the Shergold-Weir Report on Building Confidence published in February 2018 after being commissioned by the Building Ministers Forum.
It is intended that the reforms will apply to multi-storey and multi-unit residential construction, as well as certain categories of regulated designs, with the scheme to be expanded to cover other classes of building in the future.
New Penalties under the Amended Act:
|Provisions||Individual Penalty||Corporation Penalty|
|Offences under the Amended Act|
A head contractor must serve a payment claim with a supporting statement
A person who is served a payment withholding request must notify the claimant concerned if not principal contractor
A copy of the adjudicator’s determination must be served on the principal contractor by the claimant
If an adjudication application is withdrawn and there is a payment withholding request, the principal contractor must be provided notice
Respondent to provide information to adjudicator about principal contractor
|Offences under Regulations|
A head contractor who holds retention money is to ensure money is paid into and retained in a trust account established with an approved ADI
Head contractor must notify the Secretary when a retention money is trust account has been established
|Clause 8.1 or 8.2
Head contractor can only withdraw retention monies from trust account in certain situations. eg. in accordance with an order of a court
Head contractor must notify the Secretary if the trust account has been overdrawn
Head contractor must notify the Secretary if the trust account has been closed
|Clause 14.1 or 14.2Head contractor must keep records of the trust account for 3 years after the account is closed||$2,200||$11,000|
A person must provide information to the Secretary is requested regarding the trust account
The “Secretary” refers to the Commissioner for Fair Trading, Dept. Finance, Services & Innovation
Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.