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Legal Tips and Traps

Changes to the NSW Security of Payment Act

Posted by Nick Kallipolitis, Mario Rashid-Ring, Harkiran Kaur on 16 Mar 2020

In October 2019, the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act), was amended and the changes apply to Construction Contracts entered into after 21 October 2019.

These changes have wide ranging impacts throughout the construction industry, including principals, sub-contractors and head contractors.

A brief summary of the major amendments is provided below.

Comparison of Key Amendments

Amendment Contracts entered into pre-October 2019 Contracts entered into post-21 October 2019
Reference Dates

A right to payment arises on and from each reference date.

A reference date arises at the end of each month or in accordance with the terms of the construction contract.

A claimant can only serve one payment claim in respect of each reference date under the construction contract.

The requirement for a reference date has been removed.

As long as work has been performed, and/or goods supplied, a payment claim can be issued on and from the last day of the month in which work was carried out and/or goods supplied or as otherwise required by the contract.

Payment Claims post termination Unless expressly stated in the construction contract, no new reference dates arise after termination. If a contract has been terminated, a final payment claim can be served on and from the date of termination.
Payment terms Time for payment is 30 business days from the date of service of the payment claim. Maximum time for payment has been reduced from 30 business days to 20 business days after service of the payment claim.
Payment Claim

Must identify:

The construction work (or goods/services) to which the claim relates;

  • The amount of the progress payment claimed to be due; and,
  • The reference date on which it is made.
  • The construction work (or goods/services) to which the claim relates;
  • The amount of the progress payment claimed to be due; and
  • Must state that it is a payment claim made under the Act.
Companies in liquidation cannot use the Act to recover debt The Act is silent on its applicability to companies in liquidation.

Section 32B of the Act prevents a company in liquidation from serving a payment claim or taking action to enforce a payment claim, including an adjudication application.

If a company in liquidation made an adjudication application that is not determined prior to liquidation, the application is taken to have been withdrawn as at the date of liquidation.

Withdrawal of adjudication application Limited ability to withdraw an adjudication and only allowed where the adjudicator’s notice of acceptance is not received within 4 business days after the application is made, or if the adjudicator fails to determine the application within the time allowed by the Act.

An adjudication application can be withdrawn at any time:

  • Before an adjudicator is appointed; or
  • If an adjudicator has been appointed, then before the application is determined.

However, if the other party objects to the withdrawal, and in the opinion of the adjudicator it is in the interest of justice to uphold the objection, then the withdrawal has no effect.

Judicial Review Adjudications may be set aside of a jurisdictional error is established. If a jurisdictional error is established, the Court may make an order setting aside the whole determination, or only the part which is affected by the jurisdictional error.

Looking Ahead

Some practical tips including:

  • Ensuring that any payment claims clearly state that they have been made under the Act;
  • Contracts should now reflect the shorter timeframe for payment required by the Act where appropriate; and,
  • Review contract administration and project management practices to ensure compliance and to avoid the increased penalties under the Act.

If you have any questions regarding the new amendments or require assistance, please do not hesitate to reach out to Coleman Greig’s Building and Construction lawyers, who are highly experienced with matters relating to the Security of Payment Act NSW and are able to provide expert, tailored advice – no matter the complexity of the matter at hand.

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