New South Wales security of payment changes

WHO SHOULD READ THIS

• Principals, contractors, subcontractors, and suppliers in the construction industry who operate in New South Wales.

THINGS YOU NEED TO KNOW

• Significant amendments to the Building and Construction Industry Security of Payment Act 1999(NSW) will commence on 21 October 2019.

WHAT YOU NEED TO DO

• Ensure that you are familiar with the effect of the changes. The re-introduction of the endorsement for payment claims means that claimants may have to change their payment claims if they are intended to be made as statutory payment claims.

The New South Wales government has announced that the latest round of security of payment reforms will commence on 21 October 2019.

In 2018, the New South Wales government enacted the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (Amendment Act), which was to commence on a date to be fixed. The New South Wales government has now announced that the Amendment Act will commence on 21 October 2019.

The Amendment Act introduces a number of significant reforms to security of payment in New South Wales, including:

• Abolition of the concept of ‘reference dates’. Under the Amendment Act, the most significant change is the removal of the ‘reference date’ concept, with progress payment and payment claim provisions being simplified. A claimant has a default entitlement to serve a payment claim on and from the last day of the month in which construction work was first carried out (or related goods and services first supplied), and then on and from the last day of each subsequent month. If a construction contract provides for an earlier date for the serving of a payment claim in a particular month, the claimant may serve the payment claim on and from that date;
   
• Re-introduction of the endorsement. The Amendment Act re-introduces the requirement that payment claims must expressly state that they are made under the Building and Construction Industry Security of Payment Act 1999 (NSW);
   
• Shorter subcontract payment terms. The Amendment Act shortens the maximum payment period for payments from a head contractor to a subcontractor, from 30 business days to 20 business days after the date of the payment claim;
   
• Payment claims following termination. Where a construction contract has been terminated, the Amendment Act introduces a statutory entitlement for a claimant to serve a payment claim on and from the date of termination.  This amendment will overcome all court decisions to the contrary.
   
• Withdrawal of adjudication application. The Amendment Act introduces a right for a claimant to withdraw an adjudication application.  However, a claimant will not be able to withdraw an adjudication application if the respondent objects to the withdrawal and the adjudicator considers that it is ‘in the interests of justice’ to uphold the objection.
   
• Severance of an adjudication determination. The Amendment Act expressly provides that, if upon a review of an adjudication determination, the Supreme Court finds that part of the adjudication determination is affected by jurisdictional error, the Supreme Court can set aside only that part of the adjudication determination.  This avoids the instance of a jurisdictional error in only part of an adjudication determination affecting the enforceability of the entire determination.

You can find a copy of the Amendment Act here.

The New South Wales government has also made a new amending regulation, the Building and Construction Industry Security of Payment Amendment Regulation 2019 (NSW). Among else, this amending regulation specifies:

• the offences for which penalty notices may be issued; and
• the executive liability offences, which is where individuals may be liable for offences committed by a corporation (broadly, these are offences which relate to the obligations to keep trust accounts for retention money).

You can find a copy of this amendment regulation here.

For further information on any of the issues raised in this alert please contact our below authors.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.