Upcoming Amendments to Security of Payment Laws in NSW

Building & Construction Law, Commercial Litigation, Property Development 13/06/2019 by Fiona Collins

On 21 November the NSW Government passed the Building and Construction Industry Security of Payment Bill 2018 (“the Amendment Act”).

A commencement date for the Amendment Act as not yet been declared although it has since been indicated that the amendments will be introduced progressively based on the need for subordinate legislation and the preparation time required by industry stakeholders.

A summary of the key proposed amendments is below.

1. Changes to Reference Dates

The concept of a Reference Date is to be abolished. Therefore, the availability of a Reference Date will not longer be a precondition for a valid Payment Claim.

Instead, a party who has carried out construction work or supplied related good or services will be able to serve a Payment Claim monthly on the last day of the named month in which construction work was first carried, and thereafter on and from the last day of each subsequent month.

Parties will be free to agree to that a right to serve a Payment Claim will accrue on one or more earlier dates in any particular month.

Therefore, whilst the concept of a Reference Date will no longer exist, for a Payment Claim to be valid it must be issued after an available date on which a Claimant was entitled to may a progress claim. This will, however, arise at least monthly.

In addition, irrespective of the terms of a Construction Contract, a Claimant will be entitled to serve Payment Claim on or after the date of termination of the contract.

2. Changes to Payment Claims

A Payment Claim will again need to state that is it made under the Security of Payment Act, this being the position prior to amendments in 2014.

In preparation for these changes, it is recommended that Claimants resume the practice of including words to the following effect on every Payment Claim:

This is a Payment Claim made under the Building and Construction Industry Security of Payment Act 1999

3. Due Dates for Payment

The Due Date for payment of a Payment Claim to a Subcontractor (not a Head Contractor) will be reduced from 30 Business Days to 20 Business Days after a Payment Claim is served.

4. Corporations in Liquidation

The Amendment Act make clear that a company in liquidation will not be able to serve a Payment Claim.

In addition, any Adjudication Application on foot when a liquidator is appointed will be deemed to be withdrawn.

5. Withdrawal of Adjudication Applications

A Claimant to an Adjudication Application will be able to withdraw the application at any time before the appointment of an Adjudicator.

A Claimant will also be able to withdraw an Adjudication Application after an Adjudicator has been appointed (but before the application has been determined) unless the Respondent objects to the withdrawal and the Adjudicator considers that it is in the interests of justice to uphold the objection.

6. Challenges to Adjudication Applications

In addition to quashing an Adjudication Determination wholly, the Supreme Court of NSW will be empowered to sever a particular part of an Adjudication Determination that is subject to a jurisdictional error. 

7. New investigatory and enforcement powers of Authorised Officers

A new Part 3A is to be established, conferring investigatory and enforcement powers on Authorised Officers under the Security of Payment Act for the purpose of:

  • Investigating, monitoring and enforcing compliance with the requirements of the Act,
  • Obtaining information and records connected with the administration of the Act, and
  • Administering or executing the Act.

8. Code of Practice for Authorised Nominating Authorities

NSW Fair Trading’s ability to oversee Authorised Nominating Authorities will be enhanced by an ability for the Minister to introduce a Code of Practice addressing matters including the conduct, assessment and selection, training and monitoring of Adjudicator, as well as complaint-handling procedures.

9. More stringent penalties for offices committed under the Act

Pecuniary penalties for contraventions of the Security of Payment Act in relation to Supporting Statements will be increased from 200 penalty units to 1,000 penalty units in the case of corporations and 200 penalty units for individuals.