What you need to know
- On 28 November 2018, the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) received assent. The Amendment Act will implement a number of changes to the Building and Construction Industry Security of Payment Act 1999 (NSW).
- Some of the key changes include removing the concept of "reference dates" and replacing it with a statutory entitlement to monthly progress payments, requiring that subcontractors be paid sooner, and introducing liability for directors and other individuals where they are involved in contraventions of the Building and Construction Industry Security of Payment Act 1999 (NSW).
On 21 November 2018, the New South Wales government passed the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (Amendment Act). The Amendment Act will implement a number of changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act). The Amendment Act received assent on 28 November 2018 and the amendments will take effect upon proclamation.
The passing of the Amendment Act follows the Independent Inquiry into Construction Industry Insolvency initiated by the New South Wales Government in August 2012, the national Review of Security of Payment Laws initiated by the Commonwealth Government in 2017 (National Review), and consultations with peak industry bodies, and stakeholder feedback, in relation to a draft bill released by New South Wales Fair Trading on 22 August 2018 (Draft Bill).
In our earlier Construction Disputes Update we described the key reforms proposed in the Draft Bill.
Some of the changes proposed in the Draft Bill were ultimately passed in the Amendment Act without amendment. However, other changes have evolved throughout the public consultation and parliamentary processes.
No more "reference dates"
An example of a reform that evolved throughout the public consultation and parliamentary processes is the removal of the concept of "reference dates".
Whereas the Draft Bill sought to amend the definition of "reference date" so that contractors would be entitled to progress payments at least once per month (or more frequently if agreed) for work done within that month, the Amendment Act has removed the concept of "reference dates" altogether.
The Amendment Act now provides that payment claims "may be served on and from the last day of the named month in which the construction work was first carried out" (unless the construction contract makes provision for an earlier date, in which case payment claims may be served on and from that date).
Whilst the practical effect of the Draft Bill and the Amendment Act may ultimately be the same, the Amendment Act goes one step further to remove the confusion in relation to the definition of "reference date" (that was identified in the National Review).
What now?
The amendments to the Act will apply to any construction contract entered into after the commencement of the Amendment Act. The Amendment Act is now awaiting proclamation.
Parties should prepare themselves by ensuring that their existing and standard payment provisions are consistent with the Amendment Act once it enters into force. In that regard, the Amendment Act shortens the timeframe for progress payments to be made to subcontractors – progress payments will now be due and payable on the date occurring 20 business days after the payment claim is made (unless an earlier date is agreed). The previous requirement was that subcontractors were to be paid no later than 30 business days after the relevant payment claim was made).
Parties should also ensure that their contract administration processes are up to date, including to reflect the re-introduction of the requirement that payment claims include an endorsement that they are made under the Act, as well as to reflect the increased importance of those contract administration processes occurring in accordance with the Act (in light of the introduction of liability for directors and individuals involved in the management of a corporation where they are involved in contraventions of the Act).
Our Construction Disputes Group offers contract administration training to assist with compliance with the Act.
Please contact us if you require advice in relation to how the reforms may affect your business.
Authors: Adam Firth, Partner; Luke Carbon, Senior Associate; Rani Krechster, Lawyer; Mariel Hoare, Lawyer
