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The ABCC powers in payment disputes

While we have heard a lot about the new Australia Building & Construction Commission (“Commission”) powers to confront Union strong arm tactics, the Commission also has extensive powers to vet contractual arrangements for payments and investigate and record payment disputes. In cases where the Commission considers there may be a breach, the Commission may also make recommendations to the Minister on action against the alleged perpetrators.

The Building and Construction Industry (Improving Productivity) Act 2016 (“Act”) and its attendant Code for tendering and Performance of Building Work 2016 (“Code”), is the legislation which gives the Commission its powers.

 Security of Payments Working Group

The Act establishes a Security of Payments Working Group which is tasked with monitoring security of payment laws, both State, Commonwealth and Territory, and to make recommendations to the Commission about policies procedures and programs which can be implemented to improve compliance. The Commission can also make recommendations to the Minister if requested.

In addition, section 11D & 11E of the Code provides rules which apply to all entities covered by the Code. The new rules appear to place greater obligations on Principals, or those receiving payment claims, than current State obligations and industry participants should be aware of the possibility of increased obligations.

 New Rules

Entities covered by the new rules must now:

  1. comply with all applicable laws and other requirements relating to security of payments that are due to persons;
  2. ensure that payments which are due and payable are made in a timely manner and are not unreasonably withheld;
  3. have a documented dispute process about how disputes are to be settled and must comply with that process;
  4. as far as practicable, ensure that disputes about payment are resolved in a reasonable, timely and cooperative way; and
  5. report any disputed or delayed progress payment to the Commissioner and the relevant funding entity as soon as practicable after the date on which the payment falls due.

The above rules will be implied into every contractual arrangement on Code covered sites.

 Obligation for Reasonableness and Cooperative Behaviour

The rules appear to place an increased obligation for reasonableness and cooperative behaviour than those in current State payment legislation. Failure to abide by the rules can see an entity reported to the Minister and an exclusion sanction placed on that party excluding them from tendering or being awarded work on Code covered sites for up to 12 months.

If there are additional circumstances surrounding payment disputes that involve coercion or threatening behaviour, then civil penalties may apply.

 Reporting of Disputes or Delayed Progress Payments

The rule which is likely to impose the more stringent administrative obligations is the rule requiring reporting of any disputed or delayed progress payment to the Commissioner.

 Some Implications

Principals or those receiving payment claims should therefore be aware that subcontractors may now have the means to seek redress for non-payment through the Commissioner in addition to the security of payment adjudication process. It is likely we will also see reference to these Commonwealth obligations in adjudicated matters in the future.

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