Proposed Security of Payment amendments set to have far-reaching implications throughout the construction industry in NSW

On 24 October 2018, following public consultation, the New South Wales government introduced the Building and Construction Industry Security of Payment Amendment Bill 2018 (NSW) (Bill) which contains proposed amendments to the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act). If passed, the Bill will likely have widespread implications across the building and construction sector. The Bill contains several reforms intended to further improve cash flow and transparency, as well as provide greater protections to subcontractors, suppliers, and workers in the industry.

The proposed reforms are reflective of, and incorporate, a number of the recommendations made by Mr John Murray AM in his report entitled ‘Review of Security of Payment Laws – Building Trust and Harmony’ dated December 2017 (a copy of which can be found here).

A summary of the key proposed amendments is below.

1. Application of the Act
• The Bill proposes to extend the application of the Act to the residential housing sector so as to enable a residential builder/contractor to make a payment claim against an owner-occupier.
• Consistent with the position in Victoria,¹ the Bill makes clear that a corporation in liquidation cannot serve a payment claim under the Act.
2. Changes to payment claims
• The accrual of a ‘reference date’ is no longer a precondition to a valid payment claim. This concept will be abolished if the Bill is passed.
• A payment claim is able to be served monthly, on and from the last day of the named month in which the construction work was first carried out and, thereafter, on and from the last day of each subsequent month. Parties are, however, able make provision for an earlier date to serve the payment claim in any particular named month.
• A payment claim can be validly served after termination of a construction contract, closing a loophole identified in Southern Han Breakfast Point Pty Limited (in liq) v Lewence Construction Pty Limited [2016] HCA 52.
• A claimant may serve more than one payment claim per month, if the relevant construction contract provides for this.
• A payment claim must state that it is made under the Act (re-introducing a requirement that was previously repealed in the 2014 amendments to the Act).
• The due date for payment of a payment claim to a subcontractor has been reduced from 30 business days to 20 business days after a payment claim is made.
3. Changes to adjudication applications
• There is now clarity that an adjudication application is able to be withdrawn at any time before the appointment of an adjudicator. After appointment (but before an adjudication application is determined), a withdrawal will be of no effect if a respondent objects and the adjudicator considers it is in the interests of justice to uphold the objection.
• The Bill empowers the Supreme Court of NSW to sever a particular part of an adjudication determination that is subject to jurisdictional error, in addition to quashing an adjudication determination in its entirety.
4. New investigatory and enforcement powers conferred on authorised officers
• A new Part 3A is established, conferring on authorised officers under the Act investigatory and enforcement powers for the purpose of: investigating, monitoring and enforcing compliance with the requirements of the Act; obtaining information or records connected with the administration of the Act; and administering or executing the Act.
5. Code of practice for authorised nominating authorities
• In an effort to address stakeholder concerns in relation to the functions and effectiveness of authorised nomination authorities (ANAs), the Bill also bolsters NSW Fair Trading’s oversight of ANAs, allowing the Minister for Innovation and Better Regulation to make a code of practice addressing matters including the conduct, assessment and selection, training and monitoring of adjudicators, as well as complaint-handling procedures.²
6. More stringent penalties for offences committed under the Act
• Pecuniary penalties for contraventions of section 13(7) and (8) of the Act in relation to supporting statements have been increased from 200 penalty units to 1,000 penalty units in the case of a corporation and 200 penalty units for an individual.

If you have any queries in respect of the Bill or the operation of the Act generally please do not hesitate to contact us.