The Time Has Come: Security of Payment Amendment Act Has Commenced

The Building and Construction Industry Security of Payment Amendment Act 2018 No 78 9 (the Act) commenced on Monday, 21 October 2019. The Building and Construction Industry Security of Payment Amendment Regulation 2019 (Amendment Regulation) also commenced on this date. The Act and Amendment Regulation have brought a number of changes to construction contracts entered into after this date.

KEY TAKE OUTS:

• Construction industry reform
• Commencement of the Building and Construction Industry Security of Payment Amendment Act 2018
• Commencement of the Amendment Regulation 2019

Some of the significant changes that industry stakeholders need to be aware of include the following:

• The Act removes the reference to a “reference date” for the purpose of a payment claim. Instead, payment claims can now be made on and from the last date of a month, despite the terms contained within the contract;
• In the case where contracts have been terminated, a payment claim may be served on and from the date of termination;
• Any payment claim is required to state that they are “made under the Act” to avoid confusion as to which documents comprise the payment claim;
• The time for payment from a head contractor has been reduced from 30 to 20 business days. Subcontractors must now be paid by head contractors within 20 business days of the payment claim (or an earlier date provided by the contract);
• A company in liquidation is not able to rely upon the Act to make a claim or take steps to enforce a payment claim;
• Penalties under the Act have been increased including the penalty for failing to serve a supporting statement with a payment claim, which was increased from 200 penalty units to 1,000 penalty units for a corporation;
• Company directors can commit an “executive liability offence” if the corporation serves a payment claim with a supporting statement knowing that the statement is false or misleading, knows or is recklessly indifferent as to whether the offence is being committed, and fails to take reasonable steps to prevent or stop the commission of the offence. The Amendment Regulations make certain breaches of the obligations in relation to retention money held in a trust account and associated record keeping executive liability offences.

These changes to the Act and Amendment Regulations will apply to any construction contract entered into after 21 October 2019. However, under the Amendment Regulations, residential owner occupier construction contracts are exempt from the operation of the Act.

For more information on how these changes may impact your business, please contact our commercial and dispute and resolution teams.