After a difficult post-GFC period for the construction industry that saw the collapse of numerous construction companies, the NSW government has responded to the recommendations of an inquiry into the industry with a series of key changes to to the New South Wales Building and Construction Industry Security of Payment Act (Act).

The Act has actually been a feature of the construction industry in NSW for the last 15 years, with similar legislation also existing in other states.

When it was first implemented, the main objectives of the legislation were to ensure that contractors and subcontractors were paid on time, and to provide a forum for the speedy and inexpensive (albeit interim) resolution of disputes.  However, time has shown that these objectives were not being achieved – contractors and subcontractors continued to be exposed to unfavourable payment terms and delays in payment.  In addition, what were supposed to be inexpensive adjudications became “mini-trials”, with truckloads of documentation prepared by armies of lawyers and at great expense to those involved!

The following important changes to the Act apply to all non-residential construction contracts entered into on, or after, 21 April 2014:

  1. A principal[1] must make a progress payment to a head contractor[2] under a construction contract, no later than 15 business days after such head contractor has submitted its payment claim, irrespective of what the contract might provide.
  2. A progress payment to a subcontractor[3] under a construction contract must be paid no later 30 business days after such subcontractor has submitted its payment claim, irrespective of what the subcontract might provide.
  3. A head contractor must provide a supporting statement together with its payment claim. The supporting statement must be in the form prescribed in the regulations and must include “a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned”. A failure to do so or providing a false supporting statement may result in penalties of up to $22,000 being imposed.
  4. Claimants will no longer be required, when submitting a payment claim, to include a statement to the effect that such payment claim is made under the Act.

The changes are significant because effectively they mean that any invoice or other payment claim (irrespective of whether or not it is expressed to be made under the Act) will be subject to the Act and needs to be paid within the strict timeframes imposed by the Act.

In addition, head contractors must also ensure that they submit true and accurate supporting statements or they could face significant fines.

For more information or assistance with a particular construction issue, please contact Rodney Bregman at rodney.bregman@sourcelegal.com.au or Stanislav Roth at stanislav.roth@sourcelegal.com.au.

A copy of the article can be downloaded here.


[1] A principal is the person for whom construction work is to be carried out under a construction contract (the main contract) and who is not itself engaged to carry out construction work under such contract.

[2] A head contractor is the person who is engaged by the principal to carry out construction work under a construction contract.

[3] A subcontractor is a person who is to carry out construction work or supply related goods and services under a construction contract otherwise than as a head contractor.

 

By | Published On: 20th June, 2014 | Categories: Other legal services, Guides |