With proposed changes to the existing Security of Payment Legislation now tabled in Parliament, all building and construction contractors are being encouraged to plan in advance of the changes that are designed to bring South Australia in line with other jurisdictions. Commercial & Legal Partner Nicholas Graham indicated it is essential “domestic and commercial building work contractors review their existing contracts prior to the Bill coming into force so as to put themselves in the best possible position to recover payments”.

The security of payment laws revolutionised the process for resolving payment disputes in the building and construction industry, with a “pay now, argue later” regime to ensure the payment of progress claims under a construction contract. To facilitate this, these laws were intended to streamline the process and provide an alternative to traditional litigation, with timeliness, cost efficiencies and fair payments at the forefront.

Regardless of their intended operation, security of payment laws have been criticised as overly technical, with principals and contractors often being forced to navigate a myriad of complex issues and, in some circumstances, being left without a remedy. This had led to a divided reception of the security of payment laws in the building and construction industry, with the process underutilised and some feeling that it is not a fair way to resolve payment disputes.

Subsequently, in 2017, the Federal Government commissioned the National Review of Security of Payment Laws (Review).The purpose of the Review was to critically evaluate the effectiveness of the various security of payment regimes Australia wide, with a view to proposing recommendations for reform to better balance the interests of contractors and service providers and to improve the industry’s perception of security of payment laws. Ultimately, the Review made 86 recommendations, which were directed at ensuring that industry participants perceive the adjudication process as open and transparent.

Picking up on the recommendations made by the Review, the Building and Construction Industry Security of Payment (Review Recommendations) Amendment Bill 2021 (SA) (Bill) has been introduced in the South Australian House of Assembly. The Bill proposes several amendments to the Building and Construction Industry Security of Payment Act 2009 (SA) (Act). The amendments will have a wide reaching practical effect and are largely directed to giving effect to the Review’s recommendations and to bring the Act in line with interstate security of payment regimes.

Should the Bill pass Parliament in its current form, it will come in force from a day to be proclaimed and will apply to all contracts entered after that date, with some transitional provisions implemented for adjudications already initiated. Some of the key amendments include:

1. Domestic Building Work being made subject to the Act (which means that residential builders will then have recourse to the Act for claiming payments);
2. Making clear that companies in liquidation are not capable of making payment claims;
3. Extending the jurisdiction of adjudicators to make determinations to matters relating to retention monies and other forms of security;Abolishing the concept of ‘reference dates’ as the trigger for payment claims under the Act and including a new definition of a ‘defects liability period’;
4. Providing that payment will be due 10 business days after the payment claim is made, unless the contract provides otherwise, noting that contracts cannot make progress payments due more than 25 business days after the payment claim is made;
5. Requiring an approved form for Payment Claims with more extensive requirements, which is likely to increase a contractor’s likelihood of compliance with the Act and to make it simpler to enforce their right to payment; and
6. Publishing adjudication determinations in a redacted form (not capable of identifying a party to the adjudication) to encourage transparency and assist parties in better understanding the adjudication process.

Overall, the proposed reforms of the security payment laws are a well-considered approach to ensuring, as far as possible, fairness amongst construction industry participants, where it is apparent that there is a need for a fair and transparent means of resolving payment disputes. The proposed reforms are directed to doing just that and will also serve to improve the public’s perception of the building and construction industry.

It is now clear that domestic and commercial building work contractors need to review their existing contracts prior to the Bill coming into force to put themselves in the best possible position to recover payments. To do this, we recommend consulting with our experienced team of construction lawyers, who are well placed to assist you with your needs.

If you have any questions about this article, or if you are owed money and want to take steps to get paid, don’t delay – contact us! We understand the building and construction industry and we can assist you with any legal issues that you have.

Nicholas Graham, Partner

Telephone: 8206 8444

Email: nicholas@commercialandlegal.com.au