Payment has long been a major source of dispute for the construction industry and for just shy of 20 years, intervention in the form of security of payment legislation has given contractors an entitlement to recover payments for works carried out under a construction contract. The legislation was intended to strengthen the industry by improving payment practices, ensuring cash flow to contractors and thereby preventing those builders from going belly up.

Each state and territory government has implemented its own legislation, which can broadly be divided into two approaches – the east coast model and the west coast model. In December 2016, the Federal Government appointed John Murray AM to conduct a review of the various state acts, consult with stakeholders and identify areas of best practice for the construction industry. In May 2018, the final report, "Review of Security of Payment Laws: Building Trust and Harmony" was released (Murray Review).

The Murray Review makes a number of recommendations, namely that the security of payment legislation across the country be harmonised in line with the east coast model. Further recommendations include:

  • introduction of a Regulator with responsibility for the registration and grading of adjudicators, the power to prescribe the form of a payment schedule and additional information, and the publication of annual reports on the operation and effectiveness of the legislation
  • removing the Victorian carve-outs regime under which specific claims can be excluded from the operation of the legislation
  • broadening the application of the legislation to include the residential housing sector
  • abandoning the term 'reference date' and instead providing that a payment claim can be made for every named month or more frequently if provided for under the contract, and in the case of termination, enabling a payment claim to be made up to the date of termination.

Introduction to project insurance

Project insurance, sometimes referred to as construction works insurance, is insurance that covers a specific project by reference to the construction contract. Generally, project insurance covers damage to the permanent or temporary works and equipment on the construction site and third party injury or property damage. The policy may be taken out by either the principal or the contractor, and generally covers any subcontractors working on the site. Depending on the construction contract, the policy may be held jointly by the principal, the contractor and any third party, such as the financier of the project.

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.