On 21 November 2018 the NSW Government passed the Building and Construction Industry Security of Payment Amendment Act 2018 (the Act). The Act forms part of New South Wales' formal review of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) which commenced in 2015. The Amendments also form part of NSW's response to the Murray Report into Security of Payment legislation around Australia. The amendments have not yet commenced. The government is presently considering whether some amendments can commence prior to the government entering caretaker mode ahead of the election, or if the whole package will wait until the regulation is developed. The Regulation is likely to take well into next year.
Key changes
Progress claims and progress payments
Under the Act, any person who has undertaken to perform work or supply goods and services under a construction contract (Claimants) will be entitled to receive progress payments. The key difference when compared to the previous regime is that entitlement to receive a progress payment will no longer be triggered by a reference date.
Claimants will be entitled to make monthly payment claims on and from the last day of the named month in which work was first carried out or goods and services were first supplied. This amendment is designed to prevent respondents from delaying progress payments through contractually providing a different regime of reference dates. If provided for under contract, payment claims may be made earlier than the last day of a named month. The Act further entitles Claimants to make payment claims in circumstances where a contract has been terminated, essentially negating recent case-law which determined the opposite. A post-termination payment claim may be served on and from the date of termination.
The Act also shortens the maximum payment period for progress payments. Progress payments made by a head contractor to a subcontractor will need to be paid within 20 business days, rather than 30 business days.
As was the case when the SOPA was first introduced, payment claims must again be expressly endorsed as being made under the Act.
Adjudication
Several changes have been made to the adjudication process. Parties seeking to settle a claim after adjudication had been lodged historically faced uncertainty under the SOPA. The Act expressly provides for the withdrawal of an adjudication application at any time before an adjudicator is appointed. If an adjudicator has been appointed and the respondent objects to the withdrawal, the adjudicator must determine whether it is in the interests of justice to uphold the objection.
In Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140, the Supreme Court of NSW held that jurisdictional error invalidates the whole of an adjudicator's determination. In response to this, the Act provides the Supreme Court with new powers to sever part of an adjudicator's determination affected by jurisdictional error. This amendment removes the incentive to challenge determinations with minor errors in an attempt to set aside an entire determination.
The Act enables the Minister for Innovation and Better Regulation to make an enforceable code of practice for Authorised Nominating Authorities (ANA). The Department of Finance, Services and Innovation will develop the code of practice alongside interested stakeholders. The code of practice will clarify the expectations, responsibilities and obligations of ANAs. Failure to comply with the code of practice will be grounds for withdrawing authorisation.
Corporations in liquidation
The Act prohibits a claimant corporation in liquidation from taking any steps under SOPA. This is consistent with various cases over the past few years in which the courts set aside various decisions on the basis that the "pay-now-argue-later" basis of the SOPA was undermined if a company in liquidation was able to obtain payment through the SOPA process, as a respondent would be prevented from suing for recovery because the payment would form part of the distribution pool for the Claimant's creditors.
Investigation and enforcement
The Act introduces a more robust investigative and enforcement framework. Authorised officers will be provided with new powers to investigate, monitor and enforce compliance with the SOPA, including powers of entry to premises.
There are numerous other minor technical changes to the SOPA brought in by the Act. Look out for the commencement date and any transitional provisions as you can be sure to be applying the appropriate regime to your construction industry-related business dealings.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
