NSW Security of Payment reforms – what you need to know - JHK Legal Commercial Lawyers

7 November 2019

NSW Security of Payment reforms – what you need to know

The New South Wales government has announced the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (the Amendment Act) commenced on 21 October 2019.

The Amendment Act only applies to construction contracts entered into after the commencement date.

The amendments are broad and include the following significant reforms:

  1. The ‘reference date’ concept has been abolished:

The most significant amendment has been the simplification of the progress payment and payment claim provisions through the removal of the ‘reference date’ concept which was previously used to determine the date on and from which a claimant could claim a progress payment.

A claimant is now entitled by default to serve a payment claim on and from the last day of each month in which they first commenced construction work or supplied related goods and services, with each subsequent payment claim being able to be served on and from the last day of each subsequent month. The amendment serves to prevent respondents from delaying a progress payment by providing for a different regime of reference dates under their contracts.

If, however, a construction contract expressly provides a payment claim can be served on an earlier date in any particular month, then the claimant may serve the payment claim on and from that date.

  1. Payment claims after termination

If a construction contract is terminated, the Amendment Act now provides a claimant with a statutory entitlement to serve a payment claim on and from the date of termination of the construction contract.

  1. The re-introduction of endorsement

Importantly, the Amendment Act once again requires claimants to endorse payment claims expressly stating they are made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act).

  1. The reduction in the due date for payment to subcontractors

Under the Amendment Act, the maximum payment period by which a head contractor must make a progress payment to a subcontractor has been shortened from 30 business days to 20 business days.

There is no reduction to the time for payment of 15 business days from a principal to a head contractor.

  1. The ability to withdraw an adjudication application:

A claimant is now able to withdraw an adjudication application at any time after its lodgement, but before the appointment of an adjudicator.

If a claimant seeks to withdraw an adjudication application after lodgement and after an adjudicator has been appointed, a claimant will not be able to withdraw its application in circumstances in which the respondent objects to the withdrawal and the adjudicator considers it to be in the interests of justice to uphold the objection and proceed with the determination of the adjudication application.

  1. An adjudication determination may be partly severed

Historically, the Supreme Court of NSW held an adjudicator’s determination was wholly invalidated if a jurisdictional error had been made by the adjudicator.

The Amendment Act now provides the Supreme Court of NSW with new powers enabling it to sever and set aside any part of an adjudication determination which it deems to have been affected by jurisdictional error. The amendment ensures the enforceability of an adjudication determination is not affected in its entirety and removes the incentive for minor jurisdictional errors to be challenged in an attempt to set aside an entire adjudication determination.

  1. Corporations in liquidation

Consistent with recent case law, the Amendment Act now prohibits a claimant corporation in liquidation from taking steps to recover payments under the Act. The Amendment is a policy consideration to prevent a respondent which has made a payment to a claimant in liquidation under the Act from not being able to recover the payment on the basis it has formed part of the liquidation distribution pool for all creditors of the claimant.

How we can help you

JHK Legal can provide expert advice with regards to the above topics. If Kathleen’s article may be relevant to your circumstances and you would like further information, please call us on
02 8239 9600 to discuss how we may be able to assist.

Written by Kathleen Faulkner