Amendments to the Security of Payment Act are commencing 21 October 2019

AMENDMENTS TO THE SECURITY OF PAYMENT ACT ARE COMMENCING 21 OCTOBER 2019

The amendments to the Building and Construction Industry Security of Payment Act 1999 ¹ (NSW) (SOP Act) will commence on 21 October 2019.

On 19 July 2019 the Governor also approved the amendments to the NSW Building and Construction Industry Security of Payment Regulations (NSW) in order to implement some of the proposed changes in the Amending legislation.

TIMING

The amendments do not apply to construction contracts entered into before 21 October 2019.

There is now a window of opportunity for the industry to review their construction contracts to ensure they are consistent with the new SOP amendments.

There will be a transition period where two different versions of the legislation will apply depending on the date of the constructions contract which may cause confusion.

AMENDMENTS AFFECTING CONSTRUCTION CONTRACT ADMINISTRATION

Some of the main changes that will impact on the contracts and administration of them include:-

• The amendments delete the concept of ‘reference dates’ that have been used since the SOP Act commenced in 1999 and replaces them with a new payment structure so Subcontractors can make a payment claim at least once a month and make a final claim if a contract is terminated.
• The Amendments expressly limit a claimant from making more than one payment claim each month for construction work carried out in that month.
• Progress Payments are now due and payable no later than 20 business days after a payment claim is issued (instead of the current 30 days).
• In all cases a payment claim must state that it is made under the Principal Act.
• The Amendment Act clarifies the language around service of notices.

All construction contracts entered into after 21 October 2019 should be consistent with these amendments in order to avoid any confusion with the legislation in respect of the administration and claim process. This kind of ambiguity can leave Claimants and Respondents in a grey area of interpretation that may cause upsets in respect of Adjudication Determinations and make those determinations subject to judicial review.

AMENDMENTS RELATING TO DIRECTORS

The Amending Act broadens the responsibility for offences by companies to include directors of companies or individuals involved in the management of the company for a specific set of offences under the Act as follows:

• Personal liability of directors or other individuals for being an accessory to an offence committed by a corporation (section 34C).
• Personal liability of directors for certain offences committed by a corporation (section 34D).

The amended Regulations set out a schedule of fines for corporations and also for directors or individuals influencing decisions causing an offence to be made. This is a very serious shift in the application of the Security of Payment legislation where Directors of individuals are no longer able to be protected behind ‘the corporate veil’ in respect of certain offences.

Directors and Managers of companies administering construction contracts the subject of the Security of Payment Act should be seeking advice before proceeding in order to ensure that they are not subject to personal liability under the Act.

See our earlier article re the personal liability of directors under the proposed amendments at https://kreisson.com.au/personal-liability-for-directors-and-managers-of-corporations-under-security-of-payment-reforms/

Enforcement Power, Penalties, Judicial Review and other Amendments

Some other amendments include:

1. Greater penalties for failing to:-

• Attach a supporting statement to a payment claim;
• False or misleading supporting statements to a payment claim;
• Not notifying of changed circumstances;
• Not serving a copy of the Adjudicator’s Determination;
• Not giving notice of withdrawal of Adjudication Application;
• Not providing identity of principal contractor;
• Respondent providing false or misleading information.

2. Enabling the Supreme Court to Set Aside an Adjudicator’s Determination if it finds that a Jurisdictional Error has occurred.

3. The Supreme Court will be able to sever part of an adjudicator’s determination affected by jurisdictional error and, in the process, confirm the balance to be enforceable.

4. Prohibiting a corporation in liquidation from making payment claims.

5. Enable the Regulations to require information to be provided to subcontractors when entering into construction contracts.

6. NSW Fair Trading have been given extensive investigation and enforcement powers under the Principal Act.

7. Removal of ‘Owner-Occupier’ Exemption from the SOP Act but moves it to the Regulations for now.

8. Inspection of Trust Records of retention moneys by Subcontractors.

9. A new process is set out for the withdrawal of adjudication applications.

10. Modification of the period within which an Adjudicator is required to Determine an Adjudication Application where a Respondent is entitled to lodge an Adjudication Response.

The amendments provide greater penalties and power to authorised officers to investigate and enforce compliance with the SOP Act as well as a variety of other amendments and updates to the Act.

 Our Services to Update you on Amendments

We are available to conduct in house seminars to update your staff on the changes and their implications on your contract administration.

We are offering a fixed fee price for a contract review to all construction contracts to which the SOP Act applies.

Conclusion

These amendments commencing on 21 October 2019 involve a significant and wide reaching change to the Security of Payment legislation in various aspects of the Act’s reach.

Anyone entering into a construction contract to which the SOP Act applies should inform themselves as to the serious changes to all facets of the Act in order to avoid any administrative failure or offence under the Act.

Please contact us in order to obtain our assistance in helping you navigate this new regime of Security of Payment legislation.

Contact us

David Glinatsis (Director, Kreisson) and Catherine Lucas (Solicitor).

For more information, contact us at excellence@kreisson.com.au or on 02 8239 6500.

This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.

1. https://www.parliament.nsw.gov.au/bill/files/3595/Second%20Print.pdf