New South Wales Returns Fire in the Security of Payment Wars

Author: Robert Riddell

Over 1½ years since John Murray was appointed by the Commonwealth Department of Employment to undertake a review of the security of payment laws across Australia, the New South Wales Government is pressing ahead, alone, with changes to its east coast model for security of payment.

The proposed changes are set out in a recently released public consultation draft of the Building & Construction Industry Security of Payment Amendment Bill 2018 (Exposure Draft). Some of the changes seem consistent with recommendations in the Murray Report, others not so, or cover ground not the subject of Murray report recommendations.

The highlights of the Bill, include:

1. Reference Dates

Whereas the Murray Report recommended the abolition of reference dates and the adoption of a simple entitlement to make monthly claims, the Exposure Draft contemplates turning a two paragraph definition of “reference date” into a ¾ page epic in which:

  • Contracts that specify fewer than monthly reference dates are read down to monthly.
  • Where the contract involves only a single or one off payment the reference date is the day after the work or related goods and services were supplied.
  • Reference dates based on milestones are be recognised (and in doing so are carved out from exposure to implied monthly reference dates).
  • Where a contract is terminated, a reference date arises the following day (being consistent with recommendation 17 of the Murray Report), providing another reason to instead take the work out of the hands of the contractor, as opposed to terminating, where the contract permits.

2. Shortening Due Dates for Payment

The Exposure Draft proposes maximum time periods for progress payments as follows:

  • payment by a principal to a head contractor- within 10 business days (currently 15).
  • payments by a head contractor to a sub‑contractor within 20 business days (currently 30 days).

It is generally recognised that the current 30 day period is excessive. Whilst 20 business days is an improvement the question remains why sub‑contractors must wait four weeks when the head contractor will have to wait only two.

3. Endorsement of Payment Claims

Like the Phoenix rising from the ashes, the Exposure Draft proposes the reintroduction of the endorsement, or something close to it. To be a payment claim under the Act the claim “must state that it is made under this Act”. Common sense may yet prevail!

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