Important changes to the laws in relation to construction payments

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Overview

The NSW parliament has recently passed the Building and Construction Industry Security of Payment Amendment Act 2018  which makes some substantial amendments to the Building and Construction Industry Security of Payment Act 1999 (the Act).  The Act sets out the legal framework for building contractors to recover instalment payments for the performance of construction work.

The changes will become effective later in 2019 once the drafting of the applicable regulations are finalised.

Changes to Payment Claims

The new sections of the Act provide that:

  • a payment claim may be served on and from the last day of the month in which the construction work was first carried out and on and from the last day of each subsequent named month (new section 13(1A) of the Act). This change is significant as it means that an entitlement to issue a payment claim will no longer be dependent on a “reference date” in the construction contract having been met;

  • if the construction contract makes provision for an earlier date for the service of a payment claim, the claim can be served on and from that earlier date (new section 13 (1B) of the Act);

  • the time period for a subcontractor to receive payment under a payment claim will reduce from a maximum of 30 business days to 20 business days;

  • payment claims, to be valid, must specifically state that they are made under the Act (this was an original requirement in the Act before the amendments in 2014);

  • in the case of a construction contract that has been terminated, a final payment claim can be served on and from the date of termination (new section 13(1C) of the Act). This overcomes the result in the recent case of Southern Han Breakfast Point Pty Limited (in liq) v Lewence Construction Pty Limited;

  • allowing the claimant to serve a single payment claim in respect of more than one progress payment or including an amount the subject of a prior payment claim.

 

Changes to Adjudication applications and procedures

The changes made to adjudication applications are not as extensive and include:

  • clarifying that an adjudication application can be withdrawn at any time prior to the appointment of an adjudicator. A withdrawal can also occur post appointment - but if the other party objects then the withdrawal will not be effective if the adjudicator is of the opinion that it is in the interests of justice to uphold the other party’s objection;

  • allowing an adjudicator 10 business days from the date on which the respondent lodges a response or, if a response is not lodged, the end of the period within which the response was required to be lodged, to determine the adjudication application. This change gives the adjudicator further time than the existing requirement of having to provide an adjudication determination within 10 business days from the date on which the adjudicator notifies the parties of his/her acceptance of the appointment;

  • allowing the Supreme Court to sever a discrete part of an adjudication determination that is subject to jurisdictional error - while confirming the validity of the balance of the adjudication determination.

Companies in liquidation

The changes will stop any company in liquidation from serving a payment claim or taking any action to enforce a payment claim or taking any further steps in relation to the making of an adjudication determination.

Increased fines for Companies

The new laws introduce substantial increases in the maximum penalties for companies serving non-compliant payment claims, including payment claims which include false or misleading statements (a five fold increase for companies in the maximum penalties per breach from $22,000 to $110,000 per breach). 

Personal liability of directors

Directors and corporate officers can also now be held personally liable as accessories to companies who have breached the Act.

New investigation and enforcement powers

A much stronger investigative regime has been introduced to ensure compliance with the provisions of the BCISP Act including search and seizure and information gathering powers.

 

Key Take-Aways from the changes

The changes to the Act include some significant wins for construction contractors. Contractors will no longer be hamstrung by requirements in construction contracts which delay the dates on which they can issue payment claims. Subcontractors will also enjoy a shorter time period for payment once payment claims are issued. It is important that all construction industry participants are aware of these changes when they commence and make the necessary adjustments to their contractual documentation and procedures.  This area of law is highly technical and it is important that expert legal advice is obtained at the outset to avoid the potential for non-compliance with the new laws.

For further information please don’t hesitate to contact:

Daniel St George
Senior Associate
daniel@couttslegal.com.au
1300 268 887

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.