Amendments to the Building and Construction Industry Security of Payment Act 2018 (NSW) (‘the Act’) passed!

So what will change?

What’s happened?

On 21 November 2018, the NSW Government passed the Building and Construction Industry Security of Payment Amendment Bill 2018 (‘the Amendment Act’).

The SOP Act ensures that contractors, subcontractors or any other persons that undertake construction work or supplies related goods and services under a construction contract gets paid. Accordingly the SOP Act is subject to constant scrutiny and change [1].

Background

The NSW Government passed the Amendment Act in the wake of John Murray AM’s ‘Review of Security of Payment Law – Building Trust and Harmony’ report. The report was a forward thinking  and comprehensive look at one of the most dynamic and widely utilised areas of building and construction law, the security of payment legislative regime (for more information click here).

Following the Murray Review, NSW Fair Trading released a consultation paper on proposed draft changes to the SOP Act. In response to the consultation process, on 24 October 2018, the NSW Government released the Amendment Act. It passed the NSW Legislative Council on the same day (for more information click here).

The NSW Government subsequently passed the Amendment Act on 21 November 2018.

 

The main changes

The 7 main changes to the SOP Act include:

  1. No more reference dates

  2. References to the Act

  3. New offences & increased penalties

  4. Right to withdraw an application

  5. Corporations in Liquidation

  6. Payment Terms

  7. Set aside determinations

 


 

1. No more reference dates

The most significant change made by the Amendment Act is the removal of the requirement for a reference date to be entitled to a progress payment in sections 8 and 13(5). The amendment now grants the entitlement to a progress payment to:

“A person who, under a construction contract, has undertaken to carry out construction work, or to supply related goods and services is entitled to receive a progress payment”

Much of what was previously included in section 8 has been replaced by subsections in section 13. The subsections detail that a payment claim may be served on and from the last day of the named month in which the construction work was first carried out, with the same applying for each following month.

Noting that, if the contract concerned provides a provision for an earlier date for the serving of a payment claim, the claim may be served on and from that date instead of at the end of the month.

The Amendment Act now includes an express right to serve a payment claim on and from the date of termination.

2. “Made under this Act”

In accordance with recommendations from the Murray Report, a payment claim must state that it is made under the SOP Act. This avoids the administrative dilemmas of distinguishing between claims made under the SOP Act from other documents.

3. New offences and increased penalties

A key amendment is the insertion of Part 3A relating to investigation and enforcement powers. The amendment gives an authorised officer broad powers to investigate compliance with the Act. The powers include the right to enter non-residential premises at any reasonable time with or without a search warrant.

The authorised officer can make any examinations and inquiries they consider necessary, examine and inspect any records or seize any thing that the authorised officer has reasonable grounds for believing is connected with an offence against the Act.

The amendment also imposes fines of up to $4,400 for corporations or $2,200 for individuals for any hindrance, delay or obstruction of an investigations without reasonable excuse.

Other penalties have also increased. The penalty for a corporate head contractor failing to serve a supporting statement with a payment claim or serving a supporting statement that is false or misleading has increased to a penalty of up to $110,000.

4. Right to withdraw an application

The new insertion of section 17A to the Amendment Act now provides the claimant with an express right to withdraw an application prior to the application being determined. This section was previously absent due to concerns that after the claimant has seen the response from the respondent that the claimant might ‘pull’ the application if it is foreseeable that it may result in an undesirable outcome for the claimant.

Under the amendments, the withdrawal of an application will not have effect if the respondent objects to the withdrawal and if it is the adjudicator’s opinion that it is in the interests of justice to uphold those objections.

5. Liquidation

The insertion of section 32B details that a corporation in liquidation cannot serve a payment claim or take part to enforce a payment claim or an adjudication determination. If an adjudication application has not been finally determined before the corporation has commenced to be in liquidation then the application is taken to have been withdrawn on the same day.

 6. 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 the claim is made, or earlier if provided in the contract. It is only a small change however the impact will be far reaching; all of which stemming from financial and scheduling implications.

7. Set aside determination

The insertion of section 32A outlines that in any proceedings for judicial review of an adjudicator’s determination, if the Supreme Court finds that jurisdictional error has occurred, the Court can order the determination wholly, or in part to be set aside, or, the matter can be remitted to the adjudicator for redetermination.

 


 

What does this mean for the building and construction industry?

The amendments to the Security of Payments Act effects all members of the building and construction industry. It effects the application and operation of future construction contracts. Accordingly, all members of the industry should have a comprehensive understanding of the changes, and if not, they should seek legal advice to ensure they’re protected from unforeseen difficulties in the future.

These changes are not yet in force, and will only apply to construction contracts entered into after the amendments commence.

If you have any questions regarding your obligations under these new reforms, please do not hesitate to contact Morrissey Law + Advisory.

 

[1] See https://morrisseylaw.com.au/non-jurisdictional-error-no-reason-to-review-adjudications/ or https://morrisseylaw.com.au/major-security-of-payment-upheaval-needed-murray-review-released/

 

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.