The Building and Construction Industry Security of Payment Act has been operating in Victoria since 2002. Other states and territories have also enacted their own security of payment legislation such as New South Wales which has had its own security of payment regime in place since 1999. Significant difficulties have arisen with the operation of the security of payment legislation due to the lack of uniformity between the legislation in each state and territory and the technical requirements of the legislation.
The Commonwealth Government initiated a review of the Security of Payment Laws in Australia. On 21 May 2018 it issued a paper entitled Review of Security of Payment Laws outlining the results and recommendations of the review. Below is a summary of the key recommendations.
The review made 86 recommendations. Of particular note are the following recommendations:
The security of payment legislation in Australia should be harmonised. The legislation of Victoria, New South Wales, Queensland, Northern Capital Territory, South Australia and Tasmania (collectively known as the East Coast Model) differs to the legislation in Western Australia and the Northern Territory.
The “reference date” should be discarded. Instead a contractor should be able to make a payment claim for every month or more frequently if allowed under the construction contract.
The legislation should be extended to include residential building work. This will improve cash flow issues commonly faced by residential contractors and subcontractors.
“Pay when paid” provisions should not be allowed in construction contracts.
The legislation should not exclude amounts that are due under a construction contract such as work carried out with respect to variations. Further, an adjudicator may decide whether a retention amount and/or security is to be returned including the timing of the return.
A respondent should be prohibited from including in its adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule.
In the event that an adjudicator has committed a jurisdictional error in a section of an adjudication decision which does not impact on the whole of the decision, the offending section shall be severed and the balance of the decision shall be enforceable.
Adjudication fees should be fixed and not exceed capped rates prescribed by the Regulator.
Conclusion and more information
As stated above, this review was initiated by the Commonwealth government. However the states and territories are ultimately responsible for the legislation they enact. Accordingly, adoption of the recommendations cannot be guaranteed. The Commonwealth will continue to consult with the states, territories and industry representatives to determine which, if any recommendations, should be implemented.
If you would like further information about Security of Payment Laws and/or the Review of Security of Payment Laws and how it applies to you or your business, please contact Urban Lawyers.