Security of Payment Review Report Released

On 21 May 2018, the Federal Government released a final report of the review of the Security of Payment Laws by John Murray AM.

As indicated in previous articles, the review was conducted by Mr Murray with the assistance of the Department of Jobs and Small Business.

A total of 86 recommendations have been made in the Report by Mr Murray aimed at improving consistency in the Security of Payment Legislation across Australia and to enhance protections given to subcontractors.

Key Recommendations

Some of the recommendations within the Report include:

• making Security of Payment Laws nationally consistent with the East Coast model which is based on the New South Wales Security of Payment Legislation [R1];
• that the legislation should be structured as simply as possible and not provide for a two tier (composite) system of complex and standard claims as is in the case with the Queensland Legislation [R2];
• that the Act should not apply to a claimant corporation in liquidation [R10];
• that the legislation should apply to the residential housing sector so as to enable a residential contractor/builder to make a progress payment claim against an owner occupier [R12];
• to avoid confusion within the industry the use of the expression “reference date” should be abandoned [R14];
• that unless a longer period is provided under the contract, a progress claim must be made within six months after the construction work was last carried out [R24];
• that a supporting statement be provided by the head contractor to the principal and that a copy be provided to each of the subcontractors whose work has been included in the head contractor’s payment claim [R32];
• that the parties to a payment dispute may agree on an accredited adjudicator in limited circumstances, including where the dispute relates to a payment claim of more than $250,000 [R38];
• that a party to an adjudication be entitled to make an application to the Regulator for a review of the decision in certain circumstances, and including where the Adjudicator has rejected the Adjudication Application [R43];
• where an Adjudicator has committed a jurisdictional error of law in a part of the adjudication decision which does not affect the whole of the decision, the Court should be given power to sever that affected part of the decision and allow the remainder of the decision to be enforceable [R57];
• that the legislation should not require Adjudicator’s decisions to be published [R73];
• that legislation should make it an offence to use coercive and threatening conduct whether directly or indirectly in relation to a person’s statutory rights to claim for a progress payment under the legislation [R76];
• there should not be a separate mechanism beside the Security of Payment Legislation to specifically deal with enforcement of disputed progress payment claims [R80];
• all cash retentions are to be held on trust [R81];
• legislation should avoid a contractual term that purports to make a right to claim or receive payment or a right to claim an extension of time conditional upon giving notice, where compliance with the notice requirements would:

a) not be reasonably possible, or

b) be unreasonably onerous; or

c) serve no commercial purpose [R84];

• a deemed statutory trust should apply to all parts of the contractual payment chain for construction projects over $1,000,000 [R85];
• that the Australian Government should take a lead role in working with the States and Territories and key industry stakeholders towards the establishment of an nationally consistent deemed statutory trust model [R86].

A copy of the full report can be accessed at this link – https://docs.jobs.gov.au/system/files/doc/other/review_of_security_of_payment_laws_-_final_report_published.pdf

According to the press release of the Hon Craig Laundy MP – [http://minister.industry.gov.au/ministers/laundy/media-releases/national-review-security-payment-laws-final-report-released], the Government will be consulting the industry to consider the report’s recommendations and to also explore ways to improve the protections for all subcontractors in the construction industry.

Please also see our related articles “Will We Be Freed From Time Bars?” and “Harmonised Security of Payment Laws.”

Over the next few months, Kreisson will be analysing the report and providing additional updates and insights.

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