Amendments to Security of Payment Laws in NSW to Commence on 21 October 2019

# This Article was updated on 1 August 2019 following the announcement by the NSW Government that the commencement date of legislation amending the security of payment laws will be 21 October 2019, and the release of amendments to the regulations.

On 21 November 2018 the NSW Government passed the Building and Construction Industry Security of Payment Bill 2018 (“the Amendment Act”). It has now been proclaimed that the Amendment Act will take effect on 21 October 2019.

A summary of the key amendments is outlined below.

1. Changes to Reference Dates

The concept of a Reference Date is to be abolished. Therefore, the availability of a Reference Date will no 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 that a right to serve a Payment Claim will accrue an 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 make 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 a 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 it is 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 makes 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 an Adjudicator, and complaint-handling procedures.

9. More Stringent Penalties for Offences 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.

10. Residential Building Work

The Amendment Act will remove the exemption of the application of the Security of Payment Act in relation to residential building work carried out for an owner-occupier of the premises by removing the exemption in Section 7(2)(b) and will  introduce a concept of an “owner occupier construction contract“. An owner occupier construction contract is a construction contract for the for the carrying out of residential building work within the meaning of the Home Building Act on such part of any premises as the party for whom the work is carried out resides or proposes to reside in.

Work in respect of an owner occupier construction contract will become exempt from the Security of Payment Act by the Building and Construction Industry Security of Payment Amendment Regulation 2019, which will also commence on 21 October 2019.

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