Amendment to the Building and Construction Industry Security of Payment Act 1999

On 21 November 2018, the NSW Parliament passed the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (Amended Act).
The Amended Act is due to commence on 21 October 2019, and has the effect of making significant changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act).
The Amendments will not apply retrospectively, that is, it will not apply to a construction contract entered into prior to 21 October 2019. This article will summarise the key amendments to the SOP Act.

1.           Removal of the concept of the ‘reference date’ and service of payment claim

Section 8 of the SOP Act has been amended so that the entitlement to receive a progress payment is no longer triggered by a reference date.
Section 8 now provides for the entitlement to a ‘progress payment’ where a person has undertaken to carry out construction work or the supply of goods or services under a construction contract.

The date on which a payment claim for a progress payment may be made is provided for in sections 13(1A) – 13(1C). A person who is entitled to a progress payment will be able to serve a payment claim “on and from the last day of the named month” in which the construction work was first carried out, and on and from the last day of each subsequent named month.
The parties can also agree to a different date on and from which the right to serve a payment claim arises (section 13(1B)), and for payment claims to be issued more frequently than monthly (section 13(5)) if the contract so provides.

The amended section 13(5) confirms that a claimant cannot make more than one payment claim each month, in respect of work undertaken in that month.
Although a similar limitation has always been in place, the Amended Act allows for the building contract to allow for issuing more than one claim each month.

A claimant may still:

    • Serve a single payment claim in respect of more than one progress payment;
    • Include in a payment claim an amount that has been the subject of a previous claim;
    • Include in a payment claim for a particular month, work carried out in the previous named month (not the one which is the subject of the payment claim).Further, section 13(2)(c) of the Amended Act now provides that all payment claims must expressly state that it is made under the SOP Act.

The Amended Act expressly provides that a payment claim may be served on and from the date of termination. This addresses the loophole identified by the High Court in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52 so that a payment claim can be issued after the construction contract has been terminated. As a result of that decision, in certain circumstances, a payment claim could not be issued after the termination of the contract.

2.           Shortening of the due date for payment of a payment claim

The due dates for payment have also been shortened as shown in the table below:

The reduction in the due date for payment is again to promote more expeditious cash flow.

3.           Changes affecting Adjudications

Under section 17(A), a claimant may now withdraw an adjudication application at any time before the application is determined.
However, if the withdrawal occurs after appointment of an adjudicator, the withdrawal will be ineffective if the respondent objects and the adjudicator believes that it is in the ‘interests of justice’ to uphold the objection.
This provides a pathway for disputing parties to settle on their own terms, without proceeding to adjudication or contested litigation.

If an adjudication determination is challenged in the Supreme Court and the Court makes a finding of jurisdictional error in relation to the determination, the Court can sever the offending part of the determination (either setting it aside or remitting it for re-determination) and confirm any other parts of the determination.
This overcomes the effect of the decision in Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 which rendered the entirety of an adjudication determination invalid if one part was affected by a jurisdictional error.

4.           Powers to Investigate and Director Liability

 

Part 3A of the Amended Act increases enforcement and investigation powers for authorized officers.

The Amended Act introduces personal liability for directors and other officers of a corporation for the commission of corporate offences under the Act.
For example, directorial liability may be imposed if a head contractor serves a payment claim on the principal accompanied by a supporting statement, knowing that the supporting statement is false or misleading.

In Summary

The changes to the SOP Act will afford contractors greater control over the payment claim process.
Principles should refresh their knowledge of the provisions of the SOP Act to ensure they conform to the strict requirements of the SOP Act.

Contact

If you require and help navigating these changes, or simply need a professional who can guide you through the impacts that these changes could have, please contact either:

 

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