A new report on the "toxic" state of security of payment legislation in Australian states has called for the harmonisation of laws across the country and found cases of bias and breaches of natural justice are frequent and nearly always favour claimants.
The "default" nature of the payment legislation and an experimental adjudication system substantially run by "for-profit" companies were particularly to blame, according to Phillip Greenham, former Chairman of Society of Construction Law Australia (SoCLA), which released the report last month.
"The SoCLA report shows the experiment has not been successful, and is now causing considerable damage to the construction industry. Our report highlights the key problems for the construction sector and the 'toxic' nature of the 'payment schedule' system together with our recommended solutions", he said. "In cases where the respondents are willing and able to put up the significant legal cost of challenging the determination, the courts are increasingly finding that the determinations are fundamentally flawed. Last year (2013), 80% of determinations that were challenged in court were quashed."
The report prefers the "evaluative systems" operating internationally and in Western Australia and the Northern Territory and makes the following key recommendations:
- harmonisation of security of payment laws across Australia as recommended by the Cole Report in 2003
- abandoning the default feature of legislation in Australia's Eastern States, which penalises "a paying party who fails to respond to a payment claim within a very short time frame by way of payment schedule"
- improving the quality of adjudicators and maintaining a national central register
- prohibiting for-profit companies from acting as Authorised Nominating Agencies (ANAs) which appoint adjudicators, and banning arrangements whereby an adjudicator shares their fee with their appointing ANA
- permitting parties to agree on the identity of their adjudicator, and
- giving more power to adjudicators to look at the real merits of a claim, to see if the sum claimed is really due.
A full copy of the report is available for purchase at SoCLA's website, www.scl.org.au.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.