Cash flow is king: Analysing the changes to the Building and Construction Industry Security of Payment Act NSW

25 FEB 2019

 

The date has finally arrived. After years of review and consultation, the NSW government on 28 November 2018 passed the Building and Construction Industry Security of Payment Amendment Act 2018. According to the second reading speech, the Bill seeks to increase cash flow protections in the contracting chain and simplify the process for recovering a progress payment.

While the amendments have not yet come into effect (with the commencement date still to be confirmed), it is important for all parties in the building and construction industry to start preparing. If parties do not receive clear, up-to-date legal advice, there is a good chance that claims for payment (or responses to a claim) may be dismissed under the new Act. 

Having delays in payment or wrongful claims made against you can be a difficult and stressful experience. Marsdens Law Group know the new Act inside and out and can guide you through the process to help your business’s bottom line. Below is some general information about the changes.

What are the Key Changes? 

All parties should consider the following key amendments to the Act:

  1. Reference dates be damned:

    1.1.The Amendment Act has done away with the requirement of those pesky ‘reference dates’ as the timing to make a Progress Claim. Under the new Act, if you are entitled to make Progress Claim, you can serve the claim from the last day of the month in which the work was provided (unless the construction contract provides for an earlier date).

    1.2.The Amendment Act also entitles Claimants to make payment claims where a contract has been terminated, removing a loophole identified by the High Court. 

  2. Payment turnarounds

    2.1.Subcontractors will be encouraged by the Act, with their progress payments now becoming payable within 20 business days, rather than the previous requirement of 30 business days. There is no same luck for principals or head contractors, who see their time for payment remain at 15 business days.

  3. On second thoughts – Adjudication Applications:

    3.1.Under the Amendment Act, a party may withdraw any application with written notice before an Adjudicator is appointed or before an application is determined. This will make it easier to undertake settlement negotiations at an early stage during the adjudication process. 

    3.2.If the other party objects to a withdrawal, the Adjudicator will determine whether it is in the interests of justice to uphold the objection.

    3.3.Under the amendments, an adjudicator will determine an adjudication application within 10 business days after the responded is entitled to lodge their application or when the response is lodged.  

  4. Severance

    4.1.Under the new Act, parties will not be able to set aside all of an adjudication application just for jurisdiction errors. The Supreme Court can now sever parts of an Adjudicators determination that concerns jurisdictional errors, leaving the remainder as an enforceable Adjudication Application. 

  5. Tough break for liquidated companies: 

    5.1.It will become virtually impossible for liquidated companies to claim payments under the new Act, which expressly prohibits corporations in liquidation from serving a payment claim or trying to enforce a payment claim. 

    5.2.Any undetermined application from a liquidated company will also be taken to have been withdrawn on the day the corporation was placed into liquidation.

  6. Good cop, bad cop

    6.1.As a further attempt by the NSW Government to deter breaches of the Act, the new amendments increase the powers for investigation and enforcement.

    6.2.The Amendment Act also extends liability to executives in a company which has committed an offence under the Act. 

    6.3.Though the Act currently imposes penalties, the Amendment Act will increase these significantly, subject to the offence. In some cases, the penalties will be increased tenfold. 

If you find yourself in a Building and Construction dispute, or you wish to obtain further advice on how these changes and others under the Amendment Act may impact you, please do not hesitate to contact Aaran Johnson or Bharath Balasubramanian in our Dispute Resolution Department on 02 9233 1133.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.

 

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